BEIJING--China's central bank has given a 1 trillion yuan ($161 billion) lending grant to top policy bank China Development Bank to help guide medium-term interest rates, China Business News reported Monday, citing banking sources.

The People's Bank of China is testing a new monetary tool called pledged supplementary lending that adjusts money supply and guides interest rates, China Business News reported last month. The PSL, similar to the central bank's existing re-lending facility, is a supplementary lending tool backed by collateral.

China Development Bank's three-year re-lending grant likely bears an interest rate that is lower than 6%, China Development Bank said, citing its sources at the policy bank.

The move implied that the central bank has taken a first step to test medium-term interest rates using the PSL, the paper said.

Newspaper website: www.yicai.com

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(END) Dow Jones Newswires

July 21, 2014 01:35 ET (05:35 GMT)

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