(Yicai) Jan. 3 -- The net pledge supplemental lending value of China’s three policy banks reached CNY350 billion (USD49 billion) in December, the first month after the People’s Bank of China reintroduced PSLs.

The net PSL value of China Development Bank, Export-Import Bank of China, and Agricultural Development Bank of China totaled CNY350 billion last month, the third-highest monthly value ever recorded, according to data released by the PBOC yesterday.

China’s central bank created PSLs in April 2014. PSLs are large long-term pledge loans that use high-grade bond assets and high-quality credit assets as collateral. The PBOC suspended the PSL issuance last March after having issued CNY1.7 billion of PSLs in February to fund mainly real estate-related projects.

The proceeds from the PSL in December will likely be used to invest in government-subsidized houses, reconstruct villages in urban areas, and build disaster-resilient public infrastructures, Ming Ming, chief economist at Citic Securities, told Yicai.

Between 2015 and 2022, the issuance of new PSLs helped investment growth and the stabilization of credit expansion, said Zhang Jiqiang, deputy director of the research institute of Huatai Securities. The issuance was resumed last month because the conditions were met, Zhang noted.

This round of PSL is expected to exceed CNY500 billion and be split in multiple times, Zhang pointed out, adding that the PSL interest rate is at 2.4 percent now but will drop in the future.

According to previous cases, the release of one PSL fund can generate around 2.5 times the project investment, Ming said. If the PBOC issues CNY500 billion PSLs this round, they are expected to contribute 0.5 to 0.7 percentage point to the country’s total fixed asset investment growth and boost market sentiment, he explained.

PSL is a monetary policy tool that greatly impacts the basic currency, Ming added. With the issuance of new PSLs, quantitative easing will show its effects, while other monetary policy tools will likely be squeezed.

Editors: Shi Yi, Futura Costaglione