China's launches $28 bln loan facility to support equipment upgrades

An employee inspects an automated guided vehicle (AGV) at a Lonyu Robot Co factory in Tianjin, China, September 7, 2021. Picture taken September 7, 2021. REUTERS/Tingshu Wang/File Photo

BEIJING, Sept 28 (Reuters) - China's central bank said on Wednesday it has set up a relending facility worth more than 200 billion yuan ($27.59 billion) to help manufacturers and other companies upgrade their equipment, as part of a push to revive flagging demand.

The People's Bank of China (PBOC) said in a statement that it will provide low-cost funds to financial institutions and guide them to lend to firms to support such upgrades.

The loans will be issued on a monthly basis, and the interest rate for qualified firms will be no higher than 3.2% from Sept. 1, 2022 to December 31, 2022, the central bank added. China's one-year loan prime rate (LPR) is currently 3.65%.

The lending facility will support sectors including education, health, culture, tourism and sports, electric vehicle chargers, urban underground facilities, new infrastructure and industrial digital transformation, the central bank said.

The PBOC has increasingly relied on structural, or targeted policy tools, including low-cost loans, to support the slowing economy, as it faces limited room to cut interest rates for fear of fuelling capital flight and inflation.

The PBOC has rolled out relending facilities to support the transport, logistics and storage sectors that have been hit hard by COVID-19, as well as carbon emission reduction, tech innovation and elderly care.

On Sept. 14, China's cabinet announced steps to support equipment upgrades by companies, extending a raft of measures to bolster the COVID-ravaged economy.

($1 = 7.2486 Chinese yuan renminbi)

Reporting by Kevin Yao; Editing by Andrew Heavens and Kim Coghill

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