On Wednesday, China’s central bank said it had established a relending facility worth more than 200 billion yuan ($27.59 billion) to help manufacturers and other companies upgrade their equipment. This is to give a push to revive flagging demand.

The People’s Bank of China (PBOC) said that it would provide low-cost funds to financial institutions and guide them to lend to companies to support such upgrades.

The bank further said that the loans would be issued monthly, and the interest rate for qualified companies would be no higher than 3.2% from September 1, 2022, to December 31, 2022. Currently, China’s one-year loan prime rate (LPR) is 3.65%.

The relending facility would support sectors including education, culture, tourism, health, and sports, electric vehicle chargers, urban underground facilities, new infrastructure and industrial digital transformation.

The PBOC has increasingly relied on structural, or targeted policy tools, including low-cost loans, to support the slowing economy, as it faces limited room to cut interest rates for fear of fuelling capital flight and inflation.

The central bank has rolled out relending facilities to support the transport, logistics and storage sectors that have been hit hard by COVID-19, as well as carbon emission reduction, tech innovation and elderly care.

On September 14, China’s cabinet announced steps to support equipment upgrades by firms, extending a raft of measures to boost the COVID-ravaged economy.