China Unveils $72 Billion Loan Backstop to Revive Flagging Private Sector

• China launches a 500 billion yuan ($72 billion) state-backed loan guarantee program to support its private economy and SMEs.
• The initiative, from the Ministry of Finance and state agencies, aims to expand credit access for private firms struggling with weak demand and rising costs.
• The government will cover up to 80% of qualifying loans, encouraging banks to lend more, and has raised the maximum eligible loan size.
• The two-year facility is complemented by interest subsidies for SMEs and extended consumer loan subsidies until end-2026.
• The move addresses dampened business sentiment, weak domestic consumption, and cautious bank lending, but effectiveness depends on broader structural issues.

Why It Matters: China's $72 billion loan guarantee aims to boost private sector credit, but faces challenges from structural issues.