China plans to establish several high-quality financing guarantee institutions around the country to help farmers and small businesses overcome financing problems.
According to a State Council document released on Aug 10, the government will enhance policy support for financing guarantee and re-guarantee institutions so as to further stimulate entrepreneurship and innovation.
The development of the financing guarantee institutions should not only follow the market-driven principle to maximize the market’s decisive role in resource allocation — they should also focus on establishing rules to ensure lawful operation and minimize risks.
The government aims to cultivate strong and influential financing guarantee institutions around the country, facilitating a system of moderate quantity, reasonable structure, orderly competition and steady operation. Financing re-guarantee institutions at the provincial level are expected to offer services covering the whole country within the next three years.
Additionally, financing guarantee services for farmers and small businesses are expected to grow rapidly at a relatively low rate, accounting for over 60 percent of the total guaranteed in the next 5 years. The government will also issue supervisory regulations concerning the management of financing guarantee companies.
In particular, solo investment, equity sharing and holding will allow the government to endorse the founding of a number of credible financing guarantee institutions that can better serve farmers and small enterprises. Some current financing guarantee institutions will be merged and restructured to better showcase their advantages in capital and risk management.
The institutions should also aim to improve by managing credibility and risks, and innovating diverse services along with the new development of Internet finance, in a bid to provide more value-added services for clients.
A state financing guarantee fund will be set up to advance the nationwide coverage of provincial re-guarantee institutions through equity investment and technical support. This will create an organizational system of the state fund, the provincial re-guarantee institutions and local financing guarantee institutions to mitigate risks.
The evaluation mechanism concerning such institutions will also be improved to secure the service focus on agriculture and small businesses.
The government will explore a sustainable cooperation mode that involves banks and financing guarantee institutions, and it will also encourage eligible local governments to set up governmental guarantee funds which can offer reasonable compensation for the risks of guaranteed loans of banks.
Additionally, the supervisory departments should speed up efforts to establish regulations and ensure their strict implementation. Financing guarantee institutions that lose credibility and violate the law will face punishment from various parties. Local supervision departments should also develop new methods, such as information sharing and reporting, to improve the effectiveness of the supervision.
The government will also boost financial support and offer business tax exemptions and pretax deduction of reserve funds, to protect the legitimate rights and interests of financing guarantee institutions.