(Yicai Global) Sept. 29 -- China's central bank has created a more than CNY200 billion (USD27.8 billion) relending facility for banks to issue low-interest-rate loans to firms planning to upgrade key equipment in 10 sectors.

Participating institutions include the China Development Bank, two policy banks, six large state-owned commercial lenders, and 12 joint-stock commercial banks, the People’s Bank of China said yesterday. The potential beneficiaries are manufacturers and service providers, small and mid-sized firms, and micro enterprises.

The lenders can pick businesses from a list compiled by the National Development and Reform Commission in consultation with other national and local authorities for loans with a top interest rate of 3.2 percent. The banks bear any risks. The PBOC will tap the new facility to cover those loans approved between Sept. 1 and Dec. 31 at a 1.75 percent interest rate.

The interest rate gap will prompt the banks to work hard approving these special loans, Wen Bin, chief economist at China Minsheng Bank, told Yicai Global.

Even the top rate should help ease corporate finances as this month’s benchmark lending rate is 3.65 percent on one year loans and 4.3 percent on those of five years or more.

The relending facility’s establishment follows a recent cabinet decision. At a meeting of the State Council on Sept. 13, it was stated that the fund could help targeted sectors and small and micro enterprises, thereby buoying manufacturing demand and promoting an upturn in consumption.

The facility will play a role in promoting investment and widening credit, Golden Credit Rating wrote in a research report by accelerating short-term investment growth in related sectors, while contributing to economic upgrading over the long run.

Enterprises on the NDRC’s list fall into 10 sectors, including new economy infrastructure development (such as charging piles), underground urban pipe corridor laying, digital transformation, energy-saving and emissions-reduction equipment, home appliance recycling, as well as the more traditional areas of education, healthcare, culture and tourism.

Editors: Tang Shihua, Emmi Laine, Xiao Yi