The People’s Bank of China has launched a new liquidity tool to release money into the financial system ready for lending to small- and medium-sized firms, the South China Morning Post reports.
The “targeted medium-term lending facility” will allow banks to borrow from the PBOC at a reduced rate, which can then pass on those funds to the private sector. The tool is aimed at “improving financing support for small businesses, micro businesses and private enterprises,” the central bank said.
Loans issued under the new system will carry an annual interest rate of 3.15% – 15 basis points below the standard rate – and a three-year maturity. The announcement of the new lending facility came just hours after the Fed agreed to hike US rates from 2.25% to 2.5%, marking a further bifurcation in the two countries’ policies.
The central bank also said that it will extend its credit line to Chinese banks by Rmb 100 billion ($14.5 billion).