BEIJING: China’s financial regulator has told banks to “significantly cut” lending rates for small firms in the third quarter in comparison with the first quarter, two people with direct knowledge of the matter told Reuters on Monday.

The move comes amid a Chinese deleveraging campaign to crack down on financial risks and economic uncertainty triggered by a trade war with the United States that economists have cautioned could slow China’s economic growth.

The economy has already felt the pinch from the multi-year crackdown on riskier lending that has driven up corporate borrowing costs, prompting the central bank to pump out more cash by cutting reserve requirements for lenders.

In a non-public notice issued by the China Banking and Insurance Regulatory Commission (CBIRC) in late June, the regulator also asked banks to increase real-time monitoring of lending rates, the two people with knowledge of it said.

The CBIRC didn’t immediately respond to an emailed request seeking comment.

Beijing’s deleveraging campaign, aside from gradually pushing up borrowing costs for the corporate sector, has restricted companies from tapping alternative, murkier funding sources such as shadow banking.

China’s central bank does not disclose lending rates for small businesses. The weighted average lending rate for the non-financial corporate sector was 5.96 percent in March, according to the latest monetary policy report.—Reuters