PBC Photo:Xinhua

 
The People’s Bank of China (PBC), the country’s central bank, announced on Friday that China’s policy-based and developmental financial instruments will be used to boost infrastructure, innovation and other regional projects in an effort to expand effective investment and spur employment and consumption.

This comes after a State Council executive meeting on Thursday that decided to employ policy-based and developmental financial instruments with a combined scale of 300 billion yuan ($44.7 billion) by issuing financial bonds. The funds are designed to replenish the capital for major projects or to bridge financing for projects funded by special-purpose bonds.

An official from the PBC said the funds will be used in three main ways: transport and water facility infrastructure, information technology and logistics, urban development, agricultural and rural infrastructure, and national security infrastructure; funding major science infrastructure and innovation; and other projects that can be invested in by local government special bonds.

In terms of funds, the PBC will take the lead in supporting China Development Bank and Agricultural Development Bank of China to raise 300 billion yuan by issuing financial bonds. The central government will give a two-year interest subsidy to the banks as appropriate for the actual equity investment made. 

The policy-based, developmental financial instruments designed to increase financing support for major projects will enhance the stability of credit growth, expand investment, boost jobs and consumption, and stabilize the overall macroeconomic market, without resorting to massive stimulus or excessive money supply, the official from the PBC said.

The State Council's executive meeting highlighted the need to implement a prudent monetary policy to good effect, to better harness structural monetary policy tools, and boost the capability of the financial sector to serve the real economy, so as to keep overall economic performance stable, and to secure employment and people's livelihoods.

Wu Chaoming, deputy head of Chasing Research Institute told the Global Times it is expected that the 300 billion yuan of financial bonds will boost infrastructure investment by 1.2 trillion yuan, as well as promoting employment and consumption.

"After the major projects are launched, the expansion of works will create more jobs, increase the income of rural migrant workers and secure people's livelihoods,” Wu said.