China strengthens targeted financing support for small businesses

China is stepping up targeted measures to facilitate fund-raising for micro and small businesses and reduce their comprehensive financing costs to boost recovery of the real economy.

Financial institutions are encouraged to provide 1.5 trillion yuan (about $212 billion) worth of benefits to firms through cuts in interest rates and other methods this year, according to a State Council executive meeting on June 17.

In order to support such firms, government at all levels have adopted policies like conducting differentiated supervision, increasing credit availability and mitigating loan risks.

In early June, the country released measures to monitor and evaluate commercial banks' financial services to small businesses, supporting banks to adopt differentiated interest rates for lendings to small firms.

Northeast China's Jilin province launched an online financing system for small businesses to address information asymmetry between banks and firms, while service centers for first-time borrowers have opened in places like Beijing, Chongqing and Gansu to help small businesses acquire first-time loans.

This year, banks in Beijing have granted more than 80 billion yuan worth of first-time loans to over 34,000 new firms borrowing for the first time, said Li Mingxiao, director of the China Banking and Insurance Regulatory Commission's Beijing Office.

The country also strengthens innovative monetary policy tools to boost financing for small firms, with the loan extension tool expected to cover around 7 trillion yuan of inclusive loan principal to the firms, while the 400-billion-yuan re-lending quota expected to motivate local banks to issue around 1-trillion-yuan new inclusive credit loans to the firms.

Li Jianjun, a researcher with think tank Zhong Shang Zhi Ku, said that efforts should be made to expand financing channels for enterprises, providing long-term funds for production with loans while seeking for supplementary support from the bond and capital markets.