The People’s Bank of China (PBOC) will provide RMB 10 billion ($1.4 billion) to encourage lending to the private sector in an effort to soften the blow of a slowing economy, Caixin reports.
“This will send positive signals to the market, boost confidence in investing in private-enterprise bonds, prevent contagion between falling share prices, bond defaults and declining credit, and eventually drive the revival of financing for the private sector,” said Xu Zhong, director general of the PBOC’s research bureau.
The central bank will begin by relending the funds to banks who in turn pass the credit to customers. Financial institutions will have more freedom to use “market-oriented” methods that help facilitate bond issuance by private companies, the bank said.
However, compared with China’s RMB 4 trillion in outstanding corporate debt, a RMB 10 billion care package may have a limited impact on the private sector.
Beijing is accelerating its roll out of new policies aimed at tackling slowing growth and shaky domestic markets. The private sector, particularly small- and medium-sized businesses, has received particular attention as a means of funnelling capital to underrepresented areas of the economy.