CHINA’S central bank Wednesday rolled out a targeted policy tool to spur lending to small and private firms, in the latest step to support the slowing economy amid a trade dispute with the United States.

To ward off a growth slowdown, the government has in recent months unveiled a raft of policy measures, including cuts in banks’ reserve requirement ratio (RRR) to boost lending, tax cuts and steps to fast-track infrastructure projects.

The targeted medium-term lending facility (TMLF) will provide “long-term stable source of funding for financial institutions based on growth of their loans for small and private firms,” the central bank said on its website.

Large commercial banks, joint stock banks and big city commercial banks showing strong support for the real economy and meeting macro-prudential requirements will be allowed to apply for the lending facility, the central bank said.

The TMLF will mature in one year but banks will be allowed to roll it over for two more years, the central bank said.

The one-year interest rate on the TMLF will be 3.15 percent, 15 basis points lower than the rate on the medium-term lending facility (MLF), the central bank said.

Analysts at Lianxun Securities said the new policy tool could reduce the possibility of cutting RRR — the level of cash banks must hold as reserve. Further reserve cuts are widely expected after four reductions this year.

Ming Ming, head of fixed income at CITIC Securities in Beijing, said the move by the central bank was effectively a targeted rate cut.

The central bank said it would continue to implement a “prudent and neutral” monetary policy to help ensure reasonably ample liquidity and said it would implement targeted policy measures in a more precise and effective way. (SD-Agencies)