PBOC to Offer First Batch of Special Lending Funds on Monday
Nine major national banks and some local banks in ten provinces and cities are qualified for the special funding.
(Bloomberg) -- China’s central bank will provide the first batch of special re-lending funds for combating the coronavirus on Monday and will offer the facility weekly to banks later this month.
The move comes as the virus outbreak continues to hammer retail spending and industrial production and as economists continue to downgrade their growth forecasts as a result.
“The virus’ high infectiousness thus far (relative to SARS) has forced the implementation of far-reaching containment measures,” economists at Barclays led by Christian Keller wrote in a recent note. “Even if these prove successful at containing its spread, they still imply a negative impact on activity, which will be highly concentrated but not limited to China’s first quarter activity.”
The growth shock has prompted the PBOC to prioritize growth over debt control by pledging a series of emergency measures to inject cash into the financial system and wider economy.
Special Funding
Under the funding facility, nine major national banks and some local banks in ten provinces and cities are qualified for the special funding, according to PBOC Deputy Governor Liu Guoqiang.
Those financial institutions should speed up the review process for loan applications and release loans within two days, Liu said in a speech posted on the PBOC’s website.
The central bank had earlier said it would ensure funds are directed to production and business activities related to combating the coronavirus. Financial institutions must offer loans from special re-lending funds at up to 100 basis points below the one-year Loan Prime Rate, it said.
The depth of the downturn will depend on how quickly the virus is contained and by extension how quickly restrictions on travel and factory production will be lifted.
“There are still uncertainties as to how quickly the coronavirus situation will be brought under control and when production and goods transportation services will be ramped up to normal levels,” Chetan Ahya, chief economist at Morgan Stanley, wrote in a note.
To contact Bloomberg News staff for this story: Lulu Shen in Shanghai at lshen37@bloomberg.net;Enda Curran in hong kong at ecurran8@bloomberg.net
To contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net, Siraj Datoo
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