DOMESTIC banks are being offered cash and given instructions to lend more, adding to evidence of a shift toward greater official support for the economy.

The banking and insurance regulator has asked financial institutions to “earnestly implement” plans to help reduce financing costs for small firms, saying that big lenders should “take the lead,” according to a statement posted on its website. Meanwhile, the People’s Bank of China is said to plan the use of its Medium-term Lending Facility (MLF) to encourage bank loans and investment in lower-rated corporate debt, China Business News reported.

New credit as a percentage of GDP declined to an almost-three-year low in June, as a government-driven campaign to reduce financial risk couples with weaker output.

Data released Monday showed that growth in the second quarter slowed and factory activity cooled more than expected, with attention now turning to how the government can mitigate the effects of the escalating trade war.

“We have seen strong indications that the government could be shifting from mere policy easing measures to a new round of stimulus to avert a credit squeeze and economic growth slowdown,” Lu Ting, chief China economist at Nomura International Ltd., wrote in a report.

The central bank will provide commercial banks with the same amount of MLF funds for the portion of their lending exceeding the monthly loan quota. (SD-Agencies)