China has begun to provide cheap capital for local government-affiliated firms to settle their overdue payments, a move to improve the corporate balance sheets, Bloomberg reported on Tuesday, citing people familiar with the matter.
The People’s Bank of China has established a new relending facility offering low-cost funding to commercial and policy banks, in a bid to push more credit toward local government financing vehicles and other local government-affiliated firms, the report said.
Unlike its other structural tools, which cap funding for eligible institutions, the new facility has no quota, with the central bank allocating funds based on demand.
Lenders can already apply for the funding, but the PBOC has not issued an official announcement or added the tool to its list of targeted lending programs.
Currently, China's local governments and their affiliates are carrying 4.5 trillion yuan (HK$5.27 trillion) in unpaid bills, equivalent to more than 3 per cent of the country’s gross domestic product, the report said, citing estimates from China Chengxin International Credit Rating.
