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China to Step Up Financial Support for Smaller Firms and Promote Car Consumption

02 April 2020



The Chinese government will further intensify financial support to micro-, small and medium-sized enterprises, according to an executive meeting of the State Council on 31 March. First, the re-lending and re-discount quota for small and medium-sized banks will be increased by Rmb1 trillion, targeted cuts in reserve ratio for small and medium-sized banks will be further implemented, and small and medium-sized banks will be encouraged to funnel all the newly obtained funding in the form of loans at concessional rates to micro-, small and medium-sized enterprises, which are large in number and cover many sectors. Second, banks will be encouraged to increase net financing from corporate credit-backed bonds by Rmb1 trillion over the previous year to expand low-cost financing channels for private and micro-, small and medium-sized enterprises. Third, the development of supply-chain finance such as financing for purchase order, warehouse receipt pledge and accounts receivable will be encouraged so that micro-, small and medium-sized enterprises may gain access to another Rmb800 billion in annual financing backed by accounts receivable. Fourth, the loan risk sharing mechanism will be strengthened and the development of commercial insurance products will be encouraged to enhance credit for micro-, small and medium-sized enterprises. Government-backed financing guarantee fees will also be lowered to ease the overall financing burden on smaller firms.

The meeting also decided to extend the waiver on purchase taxes on new-energy vehicles until the end of 2022 in a bid to boost car consumption. The incentive was originally scheduled to expire at the end of 2020.

Source: State Council

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SMALL AND MEDIUM-SIZED ENTERPRISES72628
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AUTOMOBILE81122

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