China to ease financing strain for small companies

Chinese 100 yuan banknotes are seen in a counting machine at a bank in Beijing, China, March 30, 2016. [Photo/Agencies]

BEIJING - China will work to ease the financing strain and high funding costs for small companies amid continued efforts to cut costs in the real economy, the State Council decided at an executive meeting chaired by Premier Li Keqiang Wednesday.

"The country will maintain the prudent and neutral monetary policy, keep liquidity at a reasonable and ample level, maintain financial stability, enhance overall coordination of policies to consolidate the momentum of stable and sound economic growth, boost market confidence, achieve relatively full employment and ensure the economy runs within a reasonable range," according to a statement issued after the meeting.

To ease the financing strain and high funding costs facing small firms, the meeting came up with specific measures, including raising the relending and rediscount quotas for small companies as well as sectors concerning rural areas, agriculture and farmers, and lowering the relending interest rates for small businesses.

From September this year until the end of 2020, interest income for credit up to 5 million yuan ($769,231), compared with previous 1 million yuan, for qualified small firms as well as individual businesses will be exempt from value-added tax.

Financial institutions will also be banned from charging commitment fees and fund management fees on small companies to reduce additional financing expenses.

The country will encourage banks to expand businesses supporting small companies, increase credit supply through targeted reserve requirement ratio cuts and other monetary policy tools, and accelerate debt-to-equity swap projects.

Loans for small firms with a credit line of 5 million yuan or less will be included in the scope of collaterals for the central bank's medium-term lending facility operation.

The meeting also decided to speed up the approval process for medicines from overseas, enforce measures to lower the prices of cancer drugs and address the shortage of certain drugs.

A draft rule was also passed to prevent and address medical disputes.