China to Help Small Business
The Chinese government will roll out a series of incentives to make financing more accessible and affordable for small and micro businesses to promote cost-cutting in the real economy, the State Council’s executive meeting chaired by Premier Li Keqiang decided on Wednesday.
It was pointed out at the meeting that the prudent and neutral monetary policy will continue to be in place. The government will work to keep liquidity sufficient and appropriate, maintain financial stability, strengthen policy coordination to boost market confidence and ensure economy performs within a reasonable range.
The Chinese government puts great emphasis on financial services for the real economy, including for the small and micro businesses. Li called for giving greater priority to small and micro businesses in providing affordable finance to energize these businesses and boost employment.
— Bloomberg (@business) June 20, 2018
The Wednesday meeting approved a series of fiscal, tax and financial incentives. The volume of re-lending and rediscount for small and micro businesses, and for rural areas, agriculture and farmers will be raised. The re-lending interest rate for small and micro businesses will be lowered. Evaluation for financial institutions will be improved to make sure that businesses with a credit quota of 10 million yuan (1.55 million U.S. dollars) and below shall enjoy faster loan growth than other types of credit recipients.
Between September 1 this year and the end of 2020, the credit quota for small and micro businesses with loans that are eligible for value-added tax exemptions on interest revenues will be raised from one to five million yuan. Meanwhile, the state financing guaranty fund will cover no less than 80 percent of the financing guarantee for small and micro businesses.
Monetary tools will be applied to raise credit support for small and micro businesses. Targeted cuts in banks’ reserve requirement ratios and other monetary policy tools will be used to boost credit supply to small and micro businesses.
— Reuters Business (@ReutersBiz) June 20, 2018
Also, loans of businesses with credit quota of less than five million yuan can be included as qualified collateral for mid-term lending facility.
Banks who have yet to establish a financial inclusion department will be encouraged to open branches for communities and small businesses. It was also made clear in the Wednesday meeting that financial institutions will be prohibited to levy credit pledging fee or fund management fee on small and micro businesses to cut financing surcharges.
“The issue of lack of affordable financing for small and micro businesses must be taken seriously,” Li said. “The mentality that big banks can only serve big businesses must be rejected. Financial services for small businesses and individuals must be improved.”
This is the third time the State Council put the lowering of financing costs for small and micro businesses on the agenda of its weekly executive meeting since the new government assumed office in March. The establishment of a state financing guaranty fund was announced at the meeting on March 28 to help ease financing difficulties for small and micro businesses, farmers, agriculture and rural development. And banks will henceforth be evaluated for their performance on inclusive finance to ensure lower financing costs for the real economy this year, as was decided at the meeting on April 25.
“Small and micro businesses are leading job providers, and many of them have strong potential for growth. Their robust development will help achieve high-quality growth and improve people’s wellbeing,” Li said.
“Vigorous efforts must be made to improve the accessibility of affordable financing for small and micro businesses,” he said. “The banking sector must implement policy measures in a well-coordinated way to reduce financing costs for businesses.”
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