(Yicai) Dec. 4 -- The People’s Bank of China might roll out the pledged supplementary lending instrument again, which extends credit to targeted construction products, after the central bank announced that it will provide financial support for certain real estate projects, an analyst said.

“The PSL is a suitable tool to raise money for the construction and renovation projects recently mentioned by the PBOC,” Ming Ming, chief economist at CITIC Securities, told Yicai. “The PSL was used to finance the renovation of run-down areas in cities before, so it is very likely that the tool will be used again. But the amount that will be issued hasn’t been decided yet.”

The PBOC will work with competent authorities and local governments to provide financial support for the steady and healthy development of the real estate sector and offer medium- and long-term low-cost capital for the construction of government-subsidized houses, the reviving of old areas inside cities, and the construction of public infrastructure, Pan Gongsheng, governor of the PBOC, told Xinhua News Agency on Dec. 2. Pan made similar remarks at the Annual Conference of Financial Street Forum last month.

Funding such construction and renovation projects is a key task of the Chinese government this year as they can hedge against the negative impact that the sluggish real estate market is having on the macroeconomy and boost domestic demand, Ming said. These projects are important ways of improving people’s livelihoods and making up shortfalls in infrastructure.

The PBOC created the PSL tool in April 2014 to provide large long-term loans to policy banks. These lenders then lend money for the rebuilding of run-down areas in cities, major water conservancy projects and other specific projects. PSL are pledge loans which use high-grade bond assets and high-quality credit assets as collateral. They usually have a term of up to five years.

PSLs are used to fund specific projects only, said Zhang Jiqiang, a fixed-income analyst at Huatai Securities. The PBOC will offer a targeted supply of funds into the market through PSLs, which is equivalent to an injection of medium- and long-term capital.

There could be CNY500 billion (USD70.1 billion) or more PSLs infused into the market in more than one round with a possibility of lower interest rates, Zhang said.

Editors: Tang Shihua, Kim Taylor