China’s central bank will cut re-lending interest rates for small and micro enterprises by 50 basis points as part of a broader policy package to ease the financial strain on small firms.
The re-lending and rediscount quotas for small companies as well as sectors concerning rural areas will be increased by a total of 150 billion yuan (23.11 billion U.S. dollars), the People’s Bank of China (PBOC) said in an online statement on Monday.
Better mechanisms will be in place to support the issuance of financial bonds by small companies, while banking financial institutions will be encouraged to issue securities backed by small enterprise loans. These measures are expected to provide credit of more than 100 billion yuan, the PBOC said.
Loans for small firms with a credit line of 5 million yuan or less will be included in the scope of collateral for the central bank’s medium-term lending facility operation.
Small firms will be given more weight in the central bank’s macro-prudential assessment framework, the PBOC said.
The measures followed a central bank statement on Sunday, which said that it would cut some banks’ reserve requirement ratios by 50 basis points on July 5, to support qualified debt-to-equity swap programs and help small business financing.
