To strengthen financial support for micro, small, and medium-sized enterprises (MSMEs), the Central Committee of the Communist Party of China and the State Council have taken new policy decisions. Following these directions, the People’s Bank of China has announced several important steps.
First, the central bank will increase the lending limit by RMB 500 billion (₹6,550 billion) for loans meant to support rural development and micro and small businesses (MSBs). It will also manage the lending quota and the discount quota together, so funds can be used more flexibly and efficiently for these sectors.
Second, the central bank has created a new special lending facility of RMB 1 trillion (₹13 lakh crore) for private enterprises. This facility is part of the existing lending programs for rural development and small businesses. The aim is to encourage local financial institutions to focus more on priority sectors and provide stronger support to MSMEs.
The loan duration, interest rates, and fund disbursement rules under this new lending facility will be the same as those already used for central bank loans supporting rural development and micro and small businesses.
Overall, these measures are designed to increase credit flow, reduce funding pressure, and boost growth and stability for small, rural, and private businesses in China.
China Cuts Central Bank Lending and Central Bank Discount Rates
To make monetary policy tools more effective and to encourage banks to provide more support to important national strategies, key sectors, and weaker areas of the economy, the People’s Bank of China has decided to reduce key lending rates.
The central bank will cut both the central bank lending rate and the central bank discount rate by 0.25 percentage points. This rate cut will take effect from January 19, 2026.
After this change, the interest rates for central bank lending aimed at rural development and micro and small businesses will be:
- 0.95% for 3-month loans
- 1.15% for 6-month loans
- 1.25% for 1-year loans
In addition, after the adjustment:
- The central bank discount rate will be 1.5%
- The pledged supplementary lending (PSL) rate will be 1.75%
- The interest rate on specialized structural monetary policy instruments will be 1.25%
These rate cuts are intended to lower borrowing costs for banks, so they can lend more cheaply and actively to priority areas, helping strengthen economic growth and support weaker parts of the economy.
