PBOC Refines Monetary Policy Tools: Cuts PSL Rate by 25 bps, Expands Relending Quotas for Tech Innovation and Small Businesses

To implement the guidance of the meeting of the Political Bureau of the CPC Central Committee and the deployment of the State Council executive meeting, and to carry out a moderately loose monetary policy, the People's Bank of China (PBOC), on the basis of giving full effect to existing policy tools, has decided to further adjust and refine several monetary policy instruments, so as to create an appropriate monetary and financial environment for steady economic growth, high-quality development and the stable operation of financial markets, push the economy to keep developing toward new, better and higher-quality growth, and support a good start to the 15th Five-Year Plan period.

First, the interest rate on the Pledged Supplementary Lending (PSL) facility was cut by 0.25 percentage points. The one-year PSL rate was lowered from 1.75% to 1.5%, to better incentivize policy banks to support the real economy and serve national strategies.

Second, the scope of PSL support was expanded. The construction of the 'six networks' — water networks, new-type power grids, computing-power networks, next-generation communications networks, urban underground pipe networks and logistics networks — has been brought into the scope of PSL support, guiding policy banks to scale up financial support for the 'six networks' construction, helping expand effective investment and tapping the potential of domestic demand.

Third, the quota for the sci-tech innovation and technological transformation relending facility was increased by 200 billion yuan, and the support ratio under the facility was uniformly raised from 60% to 100%. After the adjustment, the quota rises from 1.2 trillion yuan to 1.4 trillion yuan with a higher support ratio, which will help guide banks to increase lending to small and medium-sized sci-tech enterprises and better support companies in expanding investment in equipment renewal in key areas.

Fourth, the quota for agriculture- and small-business-focused relending was increased by 500 billion yuan, of which the relending quota for private enterprises rose by 300 billion yuan. After the adjustment, the quota for agriculture/small-business relending and rediscount rises from 4.35 trillion yuan to 4.85 trillion yuan, with the private-enterprise relending quota raised from 1 trillion yuan to 1.3 trillion yuan, which will further encourage locally incorporated banks to increase credit support for agriculture-related and small businesses, especially small, medium and micro private enterprises.

The PBOC will continue to comprehensively employ a variety of monetary policy tools in light of macroeconomic conditions, price trends and macro-control needs, maintain ample liquidity, and properly guide and manage interest rate levels to serve the high-quality development of the real economy.