Crunch: PBoC Expands MLF Collateral

Much ado about nothing or a sign of credit stress?

PBoC: 中国人民银行决定适当扩大中期借贷便利（MLF）担保品范围

In order to further increase support for small and micro enterprises, green economy and other areas, and promote the healthy development of the credit bond market, the People's Bank of China decided recently to appropriately expand the scope of medium-term loan facility (MLF) collateral. The scope of newly incorporated medium-term borrowing convenience collateral includes: AA-class small and micro enterprises, green and “agricultural, rural, and peasant” financial bonds, and AA+ and AA corporate credit bonds (priority for bonds involving small and micro enterprises and green economy) ), high-quality small and micro business loans and green loans.

The People's Bank of China will continue to implement a stable and neutral monetary policy, maintain a reasonable and stable liquidity, and guide the stable and moderate growth of money and credit and social financing, and create a suitable monetary and financial environment for high-quality development and supply-side structural reforms. (Finish)

Last week I posted, No Worries, China's Latest Default Wave "Normal". A snip from one of the articles quoted:

“No matter what industry they are in, what these companies have in common is that they are finding it much harder than state-owned enterprises to get financing,” Qin Han, chief fixed income analyst at Guotai Junan Securities, wrote in a note.

“Deteriorating business could lead banks to withdraw loans and cause a cash shortage. Eventually, it will lead to more defaults. State-owned enterprises [in contrast] can rely on other sources of borrowing to sustain them, even if their businesses are feeling the strain,” he said.