PBOC Cuts Reloan Rate for Credit to Support Farming and Small Businesses

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The Chinese central bank has cut the reloan rates for loans made to support the agricultural sector and small businesses.

The People’s Bank of China (PBOC) announced on 7 December that starting from that date it would cut the rate for agricultural and small business-support reloans across three tenors by 0.25 percentage points.

The 3-month reloan rate now stands at 1.70%, while the 6-month rate is 1.90% and the 1-year rate 2.00%.

“At present the ‘three agricultures’ and micro and small-enterprises remain weak areas for economic development,” said Wen Bin (温彬), chief researcher with China Minsheng Bank, to state-owned media.

“They require further expansion of funding support. Reductions in the reloan rate to support agriculture and small business will be of benefit to reducing the funding cost for small and medium-sized banks, and further guide small and medium-sized banks to reduce lending rates for the ‘three agricultures’ and micro and small-enterprises.

“This better employs the role of monetary policy in targeted irrigation and directly reaching the real economy.”

PBOC has also scheduled the implementation of a 0.5 percentage point cut to the reserve ratio for Chinese financial institutions on 15 December, in a move which is expect to reduce the annual funding costs of Chinese financial institutions by approximately 15 billion yuan, and unleash 1.2 trillion yuan in long-term funds.

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