Financial policies in support of China’s private businesses and the economy as a whole are in place to prevent potential risks, the country’s top financial regulatory body highlighted in a recent meeting.
The meeting of the State Council Financial Stability and Development Commission, the country’s Cabinet-level financial regulatory body, was chaired by Vice-Premier Liu He on Oct 21.
Maintaining a prudent and neutral monetary policy, boosting the vitality of enterprises and better taking advantage of the capital market’s financing function are the three pillars supporting healthy economic development, according to a statement issued after the meeting on the State Council’s website.
It sends strong signals to bolster confidence in the country’s economy, stock market and structural reforms, said analysts.
In terms of monetary policy, it should better balance the relationship between stabilizing growth, deleveraging and strengthening financial regulation, according to the statement. It also reiterated the need to improve the monetary transmission mechanism.
Some specific financing measures were listed in the statement to ease financing difficulties for micro, small and medium-sized enterprises, especially in the private sector. Those measures include support for private companies’ bonds and equity financing, encouraging private firms to establish special funds and prompting commercial banks to lend to the private sector.
Deepening State-owned enterprise reforms, especially mixed-ownership reforms, is mentioned as a means of spurring economic growth. The capital market could also play a significant role in stabilizing the economy, it said.
Wen Bin, a researcher at China Minsheng Bank, said that private enterprises still face equity financing pressure and strained liquidity, especially amid recent market downturns.
“The meeting was just in time to ease the market’s concerns and highlighted some structural conflicts between deleveraging and economic stabilization,” he said.
Financial markets will be entrusted with a more significant mission to facilitate economic structural reform in China, said Xie Yaxuan, chief analyst at China Merchants Securities. “The current performance in the financial markets is inevitable when risk is releasing, but overly volatile fluctuations need to be avoided.”
The financial regulators’ meeting also urged implementation of policies and measures expounded by Liu in an interview with domestic media on Oct 19.
The next moves will focus on ways to stabilize the market, reform market institutions, encourage long-term funds to enter the market, facilitate reforms of State firms and develop private firms as well as further open up the economy, Liu said.