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Small firms get more help

Zhang Yue/Hu Yongqi
Updated: Jul 28,2016 7:08 AM     China Daily

New policies are to be introduced to encourage more financial support for small and microbusinesses.

They will include more diversified financing channels, more loans discretion for local banks, and a better developed credit rating system nationwide.

The measures were approved at the State Council’s executive meeting on July 27, presided over by Premier Li Keqiang.

“We must solve financing difficulties for small and microbusinesses as part of our efforts to support the real economy,” Premier Li said. “Such efforts will further unleash economic vitality and create more jobs.”

The new measures are a revision of the existing policy of encouraging support for small and microbusinesses, which was introduced in 2013.

Local banks, once they qualify, will have discretion on financing small and microbusinesses. Financial institutions will not be allowed to cut financing for such businesses that are eligible for renewed loans, and inappropriate fees will be scrapped for small and microbusinesses.

More social funds and financial innovation will be encouraged to support the development of such businesses.

“Financing difficulty for small and microbusinesses is a challenge that must be taken care of,” Premier Li said at the meeting. “It is not risk-free. Yet we should not stop our efforts just because of such risks. What must be done must be done.”

The new measures come as the nation’s private business growth slows. Private investment, mostly from small and microbusinesses, contributes more than 60 percent of China’s fixed asset investment and supports employment for more than 80 percent of the workforce.

But this investment grew by just 2.8 percent in the first six months of this year. A nationwide review by the central government found that the most common reason was that small and microbusinesses faced increasing difficulties in obtaining loans from banks, hindering their investment ability.

Li Zibin, president of the China Association of Small and Medium-Sized Enterprises, said at the meeting on July 27 that financing difficulties remain the top challenge and the biggest constraint for the development of small and microbusinesses, although the central government has made tremendous efforts to support them.

Premier Li said: “Adequate financing for such businesses is a common challenge globally. All government departments concerned should take concrete measures to support the healthy development of small and microbusinesses. This, in turn, is an effective way to protect the financial sector from such risks.”

Guo Tianyong, a professor of finance at Central University of Finance and Economics, said: “Traditionally, financial institutions are reluctant to grant loans to small and microbusinesses. However, financing difficulties have hindered private investment and such businesses during the first half of this year, and so favorable policies should be granted to them.”

But implementing these policies is a long process and positive impacts will be seen when small and microbusinesses continue to get support from financial institutions, Guo added.