According to the Monetary Policy Department of the People’s Bank of China, the rapid growth of bill financing in January helped to underpin the real economy, in an op-ed piece published on Financial News, a newspaper run by the PBOC.

After the central bank released its January financial data last week, the rapid growth of bill financing and undercounted bankers’ acceptances has caused market attention, and some analysts believe that the surge is due to the fact that companies arbitrage from banks through a combination of discounted bills and structured deposits. Such views are not accurate, the PBOC claimed.

The discount rate of bills is down, so enterprises are more willing to finance through bills. Compared to borrowing from banks, bill financing has become an important financing channel for SMEs, as it is more flexible and affordable, helping to lower the financing costs of private and small companies and thus support the real economy, it said.

Some enterprises deposit the funds they have financed, instead of investing in their production, hoping for arbitrage from the bank. But there is no arbitrage space any more, as the structural deposit interest rate returns to a reasonable level, the PBOC insisted.