China to free up more funds to better serve small firms

The State Council's executive meeting chaired by Premier Li Keqiang on Tuesday decided to give greater weight to inclusive financing in evaluating the performance of financial institutions, and lower the provision coverage ratio of small and medium-sized banks so as to boost financial services for micro and small firms.

The Chinese government puts great emphasis on the economic development amid the global spread of COVID-19. Li has repeatedly urged upgrading financial services in support of the real economy.

Since the start of the COVID-19 situation, the People's Bank of China, China's central bank, has cut the required reserve ratio three times this year, releasing 1.75 trillion yuan (US$246.7 billion) in liquidity to better support smaller businesses.

"We must scale up financial support for the real economy, especially the micro, small and medium-sized companies, to help them overcome the difficulties," Li said.

It was decided on Tuesday that the regulatory requirement for the provision coverage ratio of small and medium-sized banks will be lowered by 20 percentage points, to free up more credit resources and boost the capacity for serving micro and small companies.

To encourage financial institutions to better serve micro and small businesses, the meeting decided to raise the weight of inclusive finance to no less than 10 percent in the integrated performance evaluation of the branches and subsidiaries of financial institutions in the banking sector, to incentivize more lending to micro and small firms.

"Financial departments must adjust and adapt the support polices in light of the changing COVID-19 situation and economic conditions. The policies introduced need to be targeted and robust," Li said.

To ease the rent burden on micro, small and self-employed businesses, the meeting called for a three-month rent exemption in the first half of this year for such firms in the services sector renting state-owned properties.

The meeting urged state-owned enterprises, especially those directly under central management, and public institutions such as colleges, universities and research institutes, to take the lead in offering such rent relief. State-owned banks will be encouraged to extend pledge loan at concessional rates to such lessors according to their needs.