13-Aug-18, Financial Review 

The People's Bank of China (PBOC) is tackling a problem it rarely had to worry about until recently - persuading banks to lend the money they have.

China faces problem in getting its banks to lend more money (c) Qilai Shen

Image: Qilai Shen

Thanks to the central bank turning on the liquidity taps, the cost for banks to borrow from one another is now lower than the cost to borrow from the PBOC, but a large chunk of those funds is sitting idle, as lenders are unwilling to make loans or buy risky bonds.

With China trying to control already large debts, ensuring funds get to needy companies is vital to sustain growth. The central bank has begun softening rules to encourage lending, and a top-level meeting chaired by Vice Premier Liu He called for more efforts in "unclogging" the transmission mechanism.

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