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China's central bank to offer more funds for private companies
[FRANKFURT] China announced fresh measures to ease the funding strains of private companies, as top officials seek to restore confidence in the world's second-largest economy.
The State Council announced it would support bond financing by private firms on Monday, and said the central bank will provide funding to facilitate this. The People's Bank of China soon after announced a plan to support such issuance, without providing any details of the size of the plan, or when it would begin.
In a separate statement, the central bank also announced a 150 billion-yuan (S$29.8 billion) increase in its re-lending and re-discounting quota. These are tools that allow the central bank to supply financial institutions with money to lend. The quota was also raised by 150 billion yuan in June.
The central bank reiterated President Xi Jinping's vows to offer "unwavering" support for the private sector, which has been most affected by the government's campaign to curb debt and cut the shadow banking sector. The collapse of stock prices has also hit the private sector hard, as has the slowdown in economic growth.
These measures are a follow-up to the confidence-boosting comments from policymakers last week, and are trying to show they are making good on their promises of supporting the private sector, said Yao Wei, chief China economist at Societe Generale SA in Paris. "If the efforts are sustained, they will certainly be positive to everyone's confidence in long-term reforms, even though they may not lead to a quick, short-term growth rebound."
China's central bank will initially provide funds to professional agencies for them to support bond issuance by private companies, the State Council said after a meeting led by Premier Li Keqiang on Monday. The PBOC will focus its support on companies "suffering temporary difficulties but which have market share, prospects and technological competitiveness," it said in the statement on its website.