China's central bank governor, Yi Gang, on Tuesday brought up three "arrows" to support the financing of Chinese private enterprises.
China's central bank governor, Yi Gang (File Photo: VCG)
"There is a lot of water in the monetary 'pool' but we need to channel the funds to private enterprises in need of money," said Yi Gang, governor of the People's Bank of China (PBOC), the country's central bank.
The first arrow is credit. The PBOC has added a new index to the macro-prudential assessment (MPA) for commercial banks and provided them with long-term, cost-effective credit funds, in a bid to encourage more loans for private enterprises.
This year, the PBOC increased relending and rediscount quotas by a record 300 billion yuan (around 43 billion US dollars) and lowered relending interest rates by 0.5 percentage points for small lenders.
The second arrow is bond issuance. The State Council executive meeting held on October 22 decided to set up a bond financing tool for private enterprises. The PBOC will provide part of the initial funds by relending, and provide liquidity support for private enterprises with temporary difficulties.
The central bank will further expand the pilot program for bond financing support. At present, 30 private enterprises are preparing for bond issuance.
The third arrow is equity financing. Some shareholders in private listed companies have faced with close-out risks due to the downturn of the stock market this year. It is necessary to guide the behavior of financial markets.
To this end, the PBOC is promoting the equity financing tool jointly launched by private equity managers, securities companies, commercial banks, and financial asset investment companies.
"The central bank, with other departments like the Ministry of Finance, with jointly help resolve the financing problem of private enterprises," said Yi.
The PBOC has lowered the requirement reserve ratio (RRR) four times this year, releasing a total of some four trillion yuan in liquidity. Also, the bank's cut in cash that banks must hold as reserves unleashed a net of 2.3 trillion yuan for the monetary market this year.
In September-end, outstanding microloans reached 7.73 trillion yuan, an increase of 18.1 percent year-on-year. New microloans increased by 959.5 billion yuan in the first three-quarters of 2018, 1.6 times more compared with last year.