(Yicai) Sept. 18 -- Chinese financial institutions have applied for nearly CNY60 billion (USD8.4 billion) in loans from a CNY500 billion (USD70.3 billion) relending facility launched in May to support service consumption and care of the aged, as the government steps up efforts to boost spending in key sectors, the head of credit markets at the People’s Bank of China said yesterday.

In May, the central bank launched a CNY500 billion relending facility aimed at the service consumption and elderly care sectors, with a particular emphasis on hospitality, dining, tourism and education. The loans granted so far cover nearly 4,000 businesses and over 5,700 projects, Yang Hong said at a press conference.

Another relending facility for technological innovation and transformation that was set up in April last year has grown to CNY800 billion (USD112.5 billion) and, in the first half, funded nearly 100 equipment upgrade projects in the service sector with loan contracts totaling CNY11.9 billion (USD1.6 billion).

At the same time, credit is expanding. New loans to key areas of service consumption surged 62 percent in the first seven months from a year earlier to CNY164.2 billion (USD23.1 billion).

Household consumption loans, excluding mortgages, stood at CNY21 trillion (USD2.9 trillion) as of the end of July, a 5.3 percent year-on-year increase. Loans to core service sectors also climbed 5.3 percent to CNY2.7 trillion (USD392.5 billion). In addition, financial institutions are diversifying their funding channels. Auto finance and other companies issued CNY21.5 billion in financial bonds and CNY48.4 billion in asset-backed securities in the first seven months to further activate credit resources.

Recently, the Ministry of Commerce and eight other government departments rolled out new measures to spur service consumption. The approach, outlined in a document entitled ‘Several Policy Measures for Expanding Service Consumption,’ combines fiscal and financial tools.

On one hand, central government funds will be directed toward building service facilities and guiding market-oriented investment in related firms through the innovative development of trade in services. And on the other hand, the PBOC and other government agencies will encourage financial institutions to design new loan products, set fair pricing and share lending risks with local governments through compensation funds. For businesses that provide services related to people’s livelihoods, loans will also come with interest subsidies.

These measures will lower borrowing costs, stimulate demand and optimize the structure of service consumption, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance. The funds will also flow towards areas with weak public services, such as elderly care and childcare, to fast-growing sectors such as digital consumption, entertainment and sports, as well as boost service consumption.

The PBOC will work with other government agencies to make sure that policies are effectively implemented and to ensure that the benefits reach both businesses and consumers, Yang said.

Editor: Kim Taylor