(Yicai) Sept. 18 -- Chinese financial institutions have drawn CNY60 billion (USD8.4 billion) from a CNY500 billion central bank relending facility set up in May to support consumption in the service and elderly care sectors, the head of credit markets at the People’s Bank of China said.

The loans granted through the relending facility so far cover nearly 4,000 businesses and over 5,700 projects, Yang Hong said at a press conference yesterday.

The PBOC offers low-cost funding to banks and other qualified lenders through the facility, but only if they pass it on to priority sectors. This facility is designed to channel more credit into areas such as hotels, restaurants, culture and tourism, education, and eldercare.

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 it funded nearly 100 equipment upgrade projects in the service sector in the first half, with loans totaling CNY11.9 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 lending, excluding mortgages, stood at CNY21 trillion (USD2.9 trillion) at 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 lenders issued CNY21.5 billion in financial bonds and CNY48.4 billion in asset-backed securities in the first seven months.

The commerce ministry and eight other government departments recently 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.

While central government funds will go toward building service facilities and steering private investment into related companies, the PBOC and other agencies will push banks to create new loan products, set fair rates, and share risks with local governments via compensation funds. For businesses that provide essential services, loans will also be sweetened with interest subsidies.

These measures will lower borrowing costs, stimulate demand, and improve the mix of service consumption, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance. The funds will target under-served areas like eldercare and childcare, as well as fast-growing sectors such as digital services, entertainment, and sports, helping to expand overall service consumption.

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

Editor: Kim Taylor