(Sept 29): China announced several steps to encourage banks to lend to targeted sectors including infrastructure and technology, in an attempt to juice growth after a months-long slowdown in the economy.

The People’s Bank of China increased the quota for a relending programme supporting technological innovation and equipment upgrades by 200 billion yuan (US$28 billion or RM114 billion), bringing the total to 1.4 trillion yuan, according to a statement Tuesday. It also raised the share of eligible loans funded by the facility to 100% from 60%.

The PBOC also cut the one-year interest rate on its pledged supplementary lending facility — low-cost financing it provides to policy banks to fund investment —  by 25 basis points to 1.5%. The central bank last reduced it in January, when a number of other rates for lending programmes were lowered.

Through the relending and PSL programmes, the central bank offers cheap money to commercial and policy banks to incentivise them to lend to projects and companies that are aligned with government priorities. As part of its announcements on Tuesday, it also added another 500 billion yuan to its relending quota for agricultural and small businesses, including a 300 billion-yuan increase for private companies. 

Authorities expanded the PSL facility’s scope to include infrastructure initiatives spanning water systems, power grids, computing capacity, telecommunications, underground urban pipelines and logistics — industries that are part of a major project known as the Six Networks. The move is intended to encourage policy banks to finance investment and tap domestic demand, the PBOC said.

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