China calls on banks to give up US$212 billion in profits to finance cheap business lending

China’s government is reaching beyond its monetary policy tool box to free up capital and direct funds towards the nation’s cash-starved businesses to help the economy claw its way out of its worst slump in four decades.

The government has called on banks to sacrifice as much as 1.5 trillion yuan (US$212 billion) in profits this year to finance cheap loans, cut fees, defer loan repayments and grant more unsecured loans to help small businesses survive the downturn caused by the coronavirus lockdown.

Separately, the State Council, China’s cabinet, signalled late on Wednesday that it would cut the amount of reserves banks are required to hold at the central bank, freeing up more money to spur lending.

“We are guiding the market to lower lending rates through interest-rate reform,” Yi Gang, the governor of the People’s Bank of China (PBOC), told the Lujiazui Forum on Thursday, confirming the move was

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