China’s central bank is focused on further boosting capital markets and facilitating corporate financing in order to raise confidence among private businesses and offset headwinds, both external and internal.

The clear signal came from the latest third-quarter China Monetary Policy Report released by the People’s Bank of China late on Nov 9, which highlighted additional efforts to improve financing channels and ease enterprises’ borrowing difficulties. It also underlined the significance of a well-developed equity market in the long run to benefit corporate financing.

In the report, the monetary authority announced no change in its overall policy stance, which is still characterized as “prudent and neutral”, and aims to control the total money supply and seek a balance between “multiple targets”. However, dynamic and advance policy adjustments are possible under different circumstances and situations, the report stressed.

Commercial banks, as well as the stock and bond markets, will undertake the majority of financing tasks, with the central bank ensuring sufficient liquidity to maintain a lower lending interest rate to make financing both efficient and affordable, according to analysts.

Some financial channels not employed by the “standard” banking system could be allowed again to provide funding to private companies, a policy adviser told China Daily. Some of these channels used to be major components of the so-called “shadow banking sector”, which were put on hold by a regulation on asset management products issued in April.

“It will not be a simple reopening of the currently banned off-balance-sheet business. Instead, they should run under a new regulatory framework to avoid previous wild expansions,” said the adviser, on condition of anonymity.

Judging from the report, further specified supportive measures might be released afterward to encourage lending to private companies, said analysts, who also speculated financial regulators may tolerate a slightly higher nonperforming loan ratio and leveraging level for commercial banks, who face regulatory assessment pressures.

Song Yu, an economist with Goldman Sachs, said, “For more tangible measures, we now foresee a higher probability that total financing growth will accelerate from now, but more likely at a very measured pace.”

Financial constraints confronting private companies have reflected accumulated economic downturn pressure, unstable market expectations and worsening risk appetite, said the central bank report. “Some private companies have been trapped in debt default risk, further pushing up difficulties for credit financing.”

During the first three quarters this year, 24 private companies incurred bond defaults, losing 67.41 billion yuan ($9.69 billion), according to the central bank. In the same period, total bond issuance from the private sector stood at only 402.9 billion yuan, down 17.6 percent year-on-year.

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said in a recent statement that new regulations on wealth management products by commercial bank subsidiary companies will be released later this month. That will mobilize more funds raised by wealth management products to support private enterprises.

The latest China Monetary Policy Report also called for strengthening policy coordination, improving the transmission mechanism of monetary policy and making innovations in monetary policy instruments and mechanisms.

The central bank admitted that constraints exist in the structure and within certain fields in the monetary policy transmission.

To address the problem, the central bank has taken targeted measures, including issuing special-purpose bonds for private companies, expanding the range of collateral and precisely reducing the reserve requirement ratio to better support the development of private companies and small and micro enterprises.

Since the beginning of 2018, the central bank has also put into effect a raft of measures to maintain medium and long-term liquidity by cutting the RRR and Medium-term Lending Facility.

The central bank has reduced the RRR four times this year, releasing 2.3 trillion yuan into the market.