People's Bank of China, the nation's central bank, has launched a new liquidity product that will enable small business owners and companies to gain additional funding to support their growth and expansion. The move is intended to help boost the quality of life of many Chinese citizens by giving small entrepreneurs a chance to make their businesses flourish.
The low-cost loans will be handed over to the banks will have an interest rate of 3.15 percent per annum, which is 15 basis points lower than the usual rate. The banks will then be given as much as three years to pay it back, in contrast with the regular MLF which takes only one year to mature, writes the South China Morning Post.
In addition, the PBOC also said it is extending its credit line to banks by up to CNY100 billion (US$14.5 billion) to make sure that there is enough money to support the needs of small entrepreneurs. This is in addition to the CNY300 billion that was issued earlier in 2018.
Called the TMLF, or targeted medium-term lending facility, it will provide a stable and long-term source of funds for lenders based on the number of private borrowers that it needs to support, Reuters reports. The move is also meant to shore up investment and growth from within, amid rising tensions and uncertainty surrounding the China-US trade war.
Those qualified to apply for TMLF are financial institutions that show support toward the real economy, such as big-city commercial banks, large commercial banks, and joint-stock commercial banks. This initiative is part of a series of policy measures that the Chinese government has been undertaking in the past months, which include fast-tracking infrastructure projects, slashing the reserve requirement ratio in order to boost lending, and tax cuts.
