The People’s Bank of China (PBOC) will launch the targeted medium-term lending facility (TMLF) later this month, said Yi Gang, the governor of the PBOC, with the aim of encouraging lending to private and small enterprises, Economic Information Daily reported.

It is part of the PBOC’s effort to keep liquidity at a desirable level, stabilize interest rates in the financial market, and ensure the reasonable growth of money and credit, according to Yi.

In the next step, the PBOC needs to guide the liquidity it releases into the real economy, from both the supply and demand sides.

Currently, from the demand side, due to factors such as increased downward pressure on the economy, the real economy’s effective financing demand has declined. While from the supply side, banks still have a low appetite for risk, and they are also subjected to multiple constraints such as capital, liquidity and interest rates, Yi pointed out.

The PBOC will also establish an incentive mechanism for banks, encouraging them to actively lend to private and small companies, increasing support for the real economy, instead of using administrative methods such as setting targets and giving orders, according to Yi.