(Yicai) Aug. 13 -- China has unveiled a plan to cover part of the interest payments on personal consumer loans to encourage households to spend more.

Borrowers will receive a 1 percentage point cut on consumer loans for a year starting on Sept. 1, with each individual capped at a cumulative subsidy of CNY3,000 (USD420) per lending institution, according to a policy document jointly issued yesterday by the Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration.

These subsidies can cut the cost of consumer credit, enhancing people’s financial leverage to spend more and improve their living standards, while stimulating effective financing demand from both lenders and borrowers, Dong Ximiao, chief researcher of Zhaolian Consumer Finance, told Yicai.

The maximum subsidized loan amount per transaction is CNY50,000 (USD6,965), with specific categories eligible for higher amounts, including autos, education, healthcare, electronic products, and home furnishings.

The move will lower the cost of buying a car, thereby boosting auto sales, noted Cui Dongshu, secretary-general of the China Passenger Car Association.

The central government will cover 90 percent of the subsidy funds, and provincial governments the rest. Twenty-three institutions, including six big state-owned banks, 12 national joint-stock commercial banks, and five consumer finance firms, will join the scheme.

Editors: Tang Shihua, Martin Kadiev