By Yin Lei
China’s central bank decided on Wednesday to launch a new targeted medium-term lending facility (TMLF) and increase relending and rediscount quotas, a move meant to step up financial support for the country’s private sector and small and medium-sized businesses (SMEs).
The new TMLF, with a one-year maturity that can be extended twice, is available to large commercial banks, joint-stock banks and large city commercial banks that offer strong support for China’s real economy and boast healthy macro-prudential management.
These banks can apply to the People’s Bank of China (PBOC), China’s central bank, to obtain certain amount of TMLF at a rate of 3.15 percent, 15 basis points lower than that for the medium-term lending facility (MLF).
The introduction of the TMLF is intended to step up financial support for China’s real economy, particularly SMEs and private companies, said an official of the PBOC.
The TMLF, available for a maximum period of three years, will be a stable source of long-term liquidity for China’s large commercial banks as they provide more credit to these businesses at lower costs.
The PBOC also decided on Wednesday to channel more liquidity into small and medium-sized financial institutions.
The central bank announced that it would boost relending and rediscount quotas to these financial institutions by 100 billion yuan (14.5 billion U.S. dollars), giving them more liquidity to lend to the private sector and SMEs.
This year, such quotas had been increased twice in June and October by a combined amount of 300 billion yuan (43.5 billion U.S. dollars).
The latest decision to raise the quotas again was made after the previous 300 billion yuan had produced good effects and played a positive role in improving the financing environment for domestic SMEs and private companies, according to the POBC official.