New measures to address small firms' loan woes

Xinhua
China will improve the transmission mechanism of monetary and credit policies to ensure full delivery of measures to make financing more accessible and affordable for small firms.
Xinhua

China will improve the transmission mechanism of its monetary and credit policies to ensure full delivery of measures to make financing more accessible and affordable for small and micro businesses, the State Council’s executive meeting chaired by Premier Li Keqiang decided yesterday.

The central government attaches high importance to the financial services for small and micro businesses. Li pointed out that employment and growth prospects hinge on a vibrant small and micro business community. He called for more effective and efficient transmission channels of monetary and credit policies to see that all policy incentives targeting the small and micro businesses are fully delivered.

“There is now a pressing need for the financial sector to serve the real economy, micro and small businesses in particular, as these businesses play a critical role in creating jobs,” Li said.

Making financing more accessible and affordable for small and micro businesses has been included in the agenda of the State Council’s executive meeting many times since the start of this year. In June, re-lending and rediscount quota for small companies and for agriculture and rural areas was increased by 150 billion yuan (US$22 billion). Application requirements for such lending facilities were eased, new lending formats were introduced and the scope of qualified collateral widened. In July, re-lending and rediscount for small companies and for rural areas rose by 19.1 billion yuan.

“There have been some new developments both internally and externally this year, while financing difficulties for micro and small businesses were acutely felt,” Li said. “It is imperative to smooth the transmission mechanism of financial policies and keep our measures well-calibrated to ensure liquidity remains reasonably ample.”

The country will stick with prudent monetary policies and will refrain from resorting to a deluge of strong stimulus policies, as stressed at the meeting. The government will work to improve the transmission mechanism of its monetary and credit policies to ensure full delivery of measures aimed at lowering the financing cost for small and micro businesses.

More financing support will be given to small and micro businesses, including setting proper time frames and options for loan payment and shorten the time required for credit approval, and increase the share of mid- and long-term loans as appropriate.

An incentive mechanism linking performance assessment of financial institutions with the amount of loans they issue to small and micro businesses will be established, and a more accommodating approach will be exercised over the loan-to-deposit ratio of financial institutions to get them further motivated to better serve small businesses.

Regulatory and evaluation mechanisms will be improved. An indicator on small and micro business loans will be added to the evaluation mechanism. Irregularities such as linking loans with deposits and arbitrarily requiring the purchase of financial products will be resolutely prohibited.

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