China's central bank said it has earmarked Rmb400bn ($56bn) and created a new monetary policy tool to temporarily purchase small business loans from banks.
The funds, according to a statement released by the People’s Bank of China on Monday evening, will be used to buy small and medium-sized enterprise loans made between March 1 and December 31 this year. The banks must pay back the PBoC a year after the purchase is made and any profits and losses on the loans will be shouldered by the banks.
China's regional banks have been hit hard by the coronavirus outbreak and the continuing crisis around the world. Many small manufacturers have seen demand for their products contract as the US and EU struggle with containing the outbreak.
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