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April 18, 2019

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Measures to reduce MSEs’ financing costs

CHINA will work to further reduce financing cost of micro and small enterprises, with an aim to increase outstanding loans offered by five large state-owned commercial banks to MSEs by more than 30 percent this year comparing with 2018, the State Council executive meeting chaired by Premier Li Keqiang decided yesterday.

Premier Li pointed out repeatedly that it is imperative to take a multi-pronged approach to significantly ease the financing woes MSEs face, and set out clear goals for cutting their financing cost. “Lowering the MSEs’ financing cost is a prominent issue in our economy today,” Li said. “Our prudent monetary policy should be eased or tightened to the right degree to keep liquidity reasonably sufficient. We need to exercise well-timed regulation, rather than flood the economy with stimulus measures.”

It was decided at the meeting that the government must make flexible use of various monetary policy instruments. The scale of re-lending and rediscount will be expanded and more targeted cuts in the required reserve ratio for small and medium-sized banks will be made. A policy framework for applying a fairly low RRR for small and medium-sized banks will be established, as was urged at the meeting. Funds that are newly freed up from these measures will be used for lending to private companies and MSEs.

Bond financing support instruments will be promoted to see that the scale of both bond financing by private firms and special bonds issued by financial institutions for MSEs exceed the 2018 level.

Banks need to improve the evaluation and incentive mechanism to strengthen their confidence, readiness and capacity lending to MSEs, the meeting urged. The government will support banks in formulating inclusive finance plans dedicated to MSEs and guide banks toward proper pricing of lending.


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