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September 28, 2017

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China raises finance backing for small firms

CHINA’S Cabinet yesterday decided to take a slew of measures, including tax exemptions and targeted reserve requirement ratio cuts, to encourage banks to support small businesses.

From December 1, 2017, to December 31, 2019, financial institutions will be exempt from value-added taxes on income from interests for loans to small and micro-sized firms and individually owned businesses, according to a statement released after an executive meeting of the State Council presided over by Premier Li Keqiang.

Currently the policy applies to loans to farmers only.

The maximum loan to each of the above-mentioned borrowers that is eligible for tax exemption will be raised from 100,000 yuan (US$15,000) to 1 million yuan, the statement said.

The current policy of exempting stamp taxes on loan contracts for small and micro-sized businesses, as well as VAT on such businesses with monthly sales of no more than 30,000 yuan, will be extended till 2020.

Authorities will also lower the reserve requirement ratios of commercial banks that extend a big enough proportion of their outstanding or new loans to small and micro-sized businesses, individually owned businesses and farmers, according to the statement.

The stronger support will “help innovation and entrepreneurship, foster new growth momentum, expand employment and make the economy more vigorous and inclusive,” the statement said.

It said large state-owned banks will be pushed to offer inclusive financial services at the grass roots level, while the issuance of more financial bonds will be encouraged to fund loans for small businesses.

The development of financing guarantee agencies and re-guarantee agencies should be supported, and a national financing guarantee fund should be set up as soon as possible, according to the statement.

A policy-based credit guarantee system covering provinces, cities and counties should be established within three years to support the financing of small agricultural businesses, it noted.

Measures will also be taken to make it easier for startup firms to apply for interest discounts on guaranteed loans, while Big Data and cloud computing will be better used to help small businesses secure financial services.

By the end of June, outstanding loans from financial institutions to small and micro-sized businesses were 22.6 trillion yuan, nearly double the amount at the end of 2012 and accounting for 32 percent of total loans to all businesses, the statement said.


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