Move intended to help farmers, boost economy
The People's Bank of China (PBC), China's central bank, has made more than $17 billion available to more than a dozen financial institutions to help boost the economy, it said Wednesday, a day after injecting nearly $100 billion into two government policy banks.
The PBC provided 110 billion yuan ($17.19 billion) to 14 financial institutions through its medium-term lending facility to maintain liquidity in the banking system, it said in a statement on its official micro blog.
The PBC encouraged banks to use the funds to support small companies, agriculture and "weak links" in the economy, it said.
The economy expanded 7.4 percent last year, its weakest pace since 1990, and has slowed further this year, growing 7 percent in each of the first two quarters.
The government has set a target of around 7 percent growth for all of 2015.
On Tuesday, the central bank completed putting $48 billion into China Development Bank (CDB) and $45 billion into the Export-Import Bank of China, the official Xinhua News Agency reported. Both are policy banks that lend in line with government directives.
The move was to enhance their capital base and support the economy, it said.
"The injection suggests the central bank is trying to guide funds into the real economy, like exports and infrastructure construction," Wang Shengzu, China economist at Barclays Capital, told AFP.
In a bid to stimulate activity, China has cut interest rates four times since November and lowered the reserve requirement ratio, which is the amount of money banks must put aside, three times.
"The money released from earlier loosening did not go into the real economy. Instead, most of it went to the financial institutions and the stock market," Wang noted.
The benchmark Shanghai stock index rose 150 percent in the 12 months to mid-June in a borrowing-driven surge, before plummeting almost one-third within only three weeks.
The Wutongshu Investment Platform Co, which invests China's foreign exchange reserves, carried out the policy bank fund injections and will become a shareholder in both, Xinhua said.
China's foreign exchange holdings are the world's largest, though they fell to $3.69 trillion at the end of June, down from $3.73 trillion at the end of March.
Bloomberg News reported CDB and another policy bank, the Agricultural Development Bank of China, plan to issue 1 trillion yuan worth of bonds to fund construction projects to boost the economy.
