China’s central bank to support small firms, rural sectors

BEIJING: China’s central bank (CB) will cut the re-discount and re-lending rates by 25 basis points as of July 1, two sources with direct knowledge told Reuters on Tuesday, in a move that will reduce funding costs for smaller firms and rural sectors.

The Securities Times first reported the rate cuts. The three-month relending rate for small firms and rural sectors will be cut to 1.95% while the six-month rate will be cut to 2.15% and the one-year rate will cut to 2.25%, the governmentbacked newspaper reported.

The rediscount rate will be cut by 0.25 percentage point to 2%, it said.

The central bank will also cut the re-lending rate related to financial stability by 50 basis points, it added.

The People’s Bank of China has already rolled out a rat of easing steps since early February, including reserve requirement cuts and targeted lending support for virus-hit firms.

China’s economy is gradually emerging from a 6.8% decline in the first quarter, its first contraction on record.

Meanwhile, China’s factory activity expanded at a stronger pace in June ater the government lited lockdowns and stepped up investment, but persistent weakness in export orders suggests the coronavirus crisis will remain a drag on the economy for some time.

The official manufacturing Purchasing Manager’s Index (PMI) came in at 50.9 in June, compared with May’s 50.6, National Bureau of Statistics (NBS) data showed on Tuesday, and was above the 50.4 forecast in a Reuters poll of analysts.

The 50-point mark separates expansion from contraction on a monthly basis.

The uptick was underpinned by the quickening pace of expansion in production. The forwardlooking total new orders gauge also brightened, rising to 51.4 from May’s 50.9, suggesting domestic demand is picking up as industries from non-ferrous metals to general equipment and electrical machinery all showed an improvement. But export orders continued to contract, albeit at a slower pace, with a sub-index standing at 42.6 compared to 35.3 in May, well below the 50-point mark.