The Central Bank of China began this week to buy bank loans given by local banks to small companies.
The move comes in an effort to motivate banks to lend up to one trillion yuan ($ 140.18 billion) to small companies in light of the Corona virus pandemic, according to Reuters.
The People's Bank of China said on its website that it would use a special 400-billion-yuan re-lending portion to purchase loans, on a quarterly basis, from eligible banks such as commercial banks in Cities, commercial banks in rural areas, rural cooperatives, and private sector banks.
He added that qualified banks need to repurchase loans after a year, and the People's Bank of China will not bear credit risk if the loans become bad.
The central bank expects the move to help stimulate new bank loans for small businesses worth nearly a trillion yuan.
"This step will help strengthen the ability of small banks to support the real economy, especially small businesses," said Wen Bin, a prominent economic expert at Minsheng Bank in Beijing.
This also helps small banks reduce interest rates on loans to small businesses.
In a separate statement, the People's Bank of China asked banks to shift the focus of their activities from lending to real estate companies and local government financing tools that finance infrastructure projects to small businesses. p>
