SHANGHAI (Reuters) - China’s central bank plans to introduce incentives that will boost the liquidity of commercial banks, helping them to expand lending and increase investment in bonds issued by corporates and other entities, a source with direct knowledge of the matter said on Wednesday.
The People’s Bank of China, the country’s central bank, could not be immediately reached for comment after office hours.
The central bank has been making sure that lenders have ample liquidity by taking various measures, such as using its medium term loan facility (MLF), to support banks, especially those that have invested in bonds rated AA+ and below.
The central bank uses the MLF and the standing lending facility as tools for managing short- and medium-term liquidity in the banking system. It has to ensure that there is adequate liquidity especially with economic uncertainties, given the trade dispute with the United States.
In June, it lent 663 billion yuan to financial institutions via the MLF, with the outstanding MLF totaling 4,420.50 billion yuan at the end of June, up from 4,017.00 billion yuan at the end of May.
Reporting by Shanghai Newsroom; editing by David Stamp