The headquarters of the People's Bank of China in Beijing Photo: IC

The People's Bank of China (PBC), the country's central bank, cut the relending rate to support rural and small enterprises by 25 basis points effective on Tuesday, the Securities Times newspaper reported.

The interest rate for relending for three- and six-month terms will be reduced to 1.7 percent and 1.9 percent, while the relending rate for one-year transactions will be cut to 2 percent. 

This marks another adjustment of relending facility rates after the central bank cut the interest rates by 25 basis points in July 2020.

As of the end of September, the balance of relending for rural and small firms stood at 1.47 trillion yuan ($230.84 billion), and another 300-billion-yuan quota of relending will be added in the fourth quarter, the Securities Times reported.

The move came just one day after the central bank announced a 50 basis-point universal cut in the reserve requirement ratio (RRR) for financial institutions that will inject 1.2 trillion yuan in long-term liquidity into the economy.

Analysts said the cut on Tuesday is line with the RRR reduction on Monday, which aims to make China's monetary policy play a more precise and targeted role in supporting the weak spots of the economy and shoring up the real economy. 

During a series of recent meetings, top Chinese officials have repeatedly called for more support for small and medium-sized businesses, pointing to lingering challenges and burdens on the firms.

China's private Caixin manufacturing purchasing managers' index (PMI), which tracks small firms, stood at 49.9 in November, down 0.7 points from the previous month, underscoring difficulties faced by smaller manufacturers.

The mark of 50 separates growth from contraction on a monthly basis. 

Global Times