China moves to increase bank liquidity

Boosts lending to small and medium enterprises.

The People's Bank of China, the central bank, has arranged a US$1.94 billion re-lending quota to boost financial support for small and micro-enterprises and rural areas.

Re-lending is a monetary tool used by the PBOC to increase financial institutions' liquidity and guide credit flows.

It requires that funds from the quota be credited to small and micro-businesses, as well as the agricultural sector, rural areas and farmers.

Some US$24 billion has accumulated in the re-lending quota to date, and 45% has gone to small and micro-businesses and 27% to rural areas.

The re-lending tool has played a role in increasing the availability of credit for small and micro-businesses and rural areas. China has been pursuing a prudent monetary policy while trying to utilize its credit reserves to support the real economy.