Since the start of the year, China has ratified policies that will help ease corporate financing difficulties and tap the financial sector to help build the real economy. Recently, The People's Bank of China (PBOC) confirmed that these policies have finally taken effect and are in full motion.
In a statement during a press briefing, PBOC Deputy Governor Zhu Hexin said that the crafted policies have been successfully implemented. He added that these measures have been implemented in an orderly manner and that they will take effect gradually.
Mr. Zhu also said during the press briefing that banking liquidity is currently reasonable and free-flowing with an exceptional growth in terms of loans.
Based on the latest figures released by the Central Bank, China's new loans which are Yuan-denominated currently stood at 10.48 trillion Yuan or $1.5 trillion. This is just for the first seven months of the year. This is up by 1.69 trillion Yuan on a year-on-year basis.
Most of the loans were made in order to bankroll various important infrastructure projects. Small and upstart businesses were also among the top recipients of these loans. According to the Bank of Communications, this is a sign that the effect of targeted credit policy can already be felt. The bank predicted that regulators will focus more into this particular area of interest.
In order to maintain this recent boost, authorities have instructed banks to continue their credit support especially to companies and businesses that have outstanding records and qualifications but are hampered by capital or financial problems. This regulation was released as speculations have emerged that some lenders may require companies and businesses to pay off their outstanding loans early or may face the possibilities of stopping all lending agreements.
The China Banking and Insurance Regulatory Commission (CBIRC) has already instructed banks and other financial institutions to double their efforts in order to meet the increase of financial demands when it comes to the real economy. The CBIRC also highlighted that financial institutions should prioritize private and small businesses that are low on capital. Moreover, infrastructure projects, agricultural and rural regions, and sluggish economic areas should also be top priorities.
Aside from the real economy, the CBIRC also said that a significant portion of loans will be allotted to import and export enterprises and those that are in consumer finance.
