China is lowering the long-term funding rate for policy banks by 0.25 percentage points to stimulate the economy and expand infrastructure investment. This move is seen as a response to ongoing domestic demand weakness and a real estate slump, aimed at reinforcing economic growth through infrastructure projects.
According to the China Securities Journal on September 30, the People's Bank of China announced on September 29 that it would reduce the one-year pledged supplementary lending (PSL) rate from 1.75% to 1.5%. PSL is a monetary policy tool used by the People's Bank of China to provide long-term funds to policy banks.
Notably, the construction of the so-called 'six major networks'—including water resource networks, new power grids, operational networks, next-generation communication networks, urban underground pipelines, and logistics networks—has been newly included as eligible for PSL support. This is viewed as an effort by the Chinese government to enhance investment in digital, energy, and logistics infrastructure to tap into domestic potential.
Additionally, the limit for re-lending aimed at scientific and technological innovation and technological upgrades has been increased by 200 billion yuan to 1.4 trillion yuan. The re-lending limit for agriculture and small businesses will rise by 500 billion yuan, with the limit for private enterprises increasing by 300 billion yuan to 1.3 trillion yuan.
Dong Ximiao, chief economist at Zhixin Investment, stated, "Including the six major networks in the support category was an anticipated measure. It can stabilize infrastructure investment, expand effective investment, and optimize the allocation of financial resources."
Pang Ming, a member of the China Chief Economist Forum, explained that this measure aims to guide funds toward major infrastructure construction, scientific and technological innovation, and technological upgrades through cost reductions, expanded support scope, increased limits, and higher support ratios.
The People's Bank of China has indicated that it will continue to utilize various monetary policy tools and maintain sufficient liquidity while considering macroeconomic and price conditions to support the qualitative development of the real economy.
* This article has been translated by AI.
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