China will make more targeted efforts to boost the financial sector’s support for the real economy and tackle financing difficulties for small and micro businesses, the State Council’s executive meeting chaired by Premier Li Keqiang decided on Nov 9.
The meeting heard a report on delivery of the policies regarding accessible and affordable financing for micro and small businesses.
The Chinese government places great importance on financial services targeting micro and small businesses. President Xi Jinping stressed the need for better financial services and smooth channels for financial services to flow to the real economy, especially smaller companies. Premier Li Keqiang underlined the importance of smoothing the policy transmission channels with targeted measures and encouraging financial institutions to raise the share of loans to micro and small companies and cut their financing costs.
The People’s Bank of China, China’s central bank, has conducted targeted cut to required reserve ratio (RRR) four times this year, releasing a liquidity of 2.3 trillion yuan. By the end of September, outstanding loans for micro and small firms totaled over 33 trillion yuan, up by 11.4 percent year on year.
“Government departments are encouraged to take a multi-pronged approach, and we must waste no time in helping small firms tackle their liquidity difficulties,” Premier Li said. “No loans extended should be willfully withdrawn.”
Greater efforts will be made to enhance financial services for the private sector, especially micro and small firms.
Financing channels will be widened. The scope of qualified collateral for the Medium-term Lending Facility (MLF) will be expanded to cover loans for micro and small firms with a credit quota of up to 10 million yuan per company. Support will be given to more firms for equity and bond financing.
Financial institutions will be encouraged to make their lending businesses to micro and small firms part of the internal performance evaluation, and allocate corresponding incentive rewards.
The meeting urged hitting the target of lower lending rate for micro and small firms. Major commercial banks were called upon to work hard to cut their average lending rate by one percentage point in the fourth quarter compared with the first quarter, and any unnecessary procedures or surcharges in financing will be removed. The meeting also called for effective measures to prevent credit risks.
Financial institutions will be encouraged to take substantive measures to further tilt policies in favor of micro and small firms as well as other private companies, Premier Li said.
The government must also provide support in terms of guarantee and taxation, he added.
The meeting also discussed how to better leverage government-managed guarantee funds to make more financial resources available to micro and small companies. It was decided at the meeting that supporting agricultural and rural development as well as small companies should be the primary business of all government-managed guarantee and re-guarantee institutions, with priority given to micro and small firms as well as entities engaged in agricultural and rural development with a guarantee volume of up to 5 million yuan per entity.
Financing costs will be lowered. The State Financing Guaranty Fund should not set its guarantee fee rate higher than provincial institutions. Risks should be shared, with both the State Financing Guaranty Fund and financial institutions shouldering no less than 20 percent of risks.