The People’s Bank of China announced an easing of borrowing requirements as a step to boost lending and stimulate growth in response to data which suggests weakening growth. The bank will allow more commercial lenders to use loans as collateral to borrow funds at low rates from the central bank in return for the lender steering loans to designated sectors of the Chinese economy. The PBoC started a trial last year in two provinces and this announcement marks an expansion to other provinces.
While some Chinese media has branded the exercise “quantitative easing”, UBS thought the scale of the move would be limited as there was little demand for credit from China’s corporate sector in any case. Goldman Sachs saw the expanded programme as more a way changing the composition of loans. The programme is “aimed more at improving the structure of lending than meaningfully increasing the overall amount.”