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China boosts financing for small and micro businesses

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Staff Writer | July 29, 2016
Measures to provide more financial support to Chinese small and micro businesses were approved at the State Council's executive meeting.
China small business
Doing business in Asia   Financing costs are a major issue
This means the Chinese government will develop policies that encourage more diversified financing channels, more loans discretion among local banks and a better developed credit rating system across the country, and make sure these loans are extended to the debtors in full.

The new set of measures is an update on the country's document about encouraging support for small and micro businesses published in 2013.

It has been decided that local banks with due diligence will have discretion on financing local small and micro businesses on flexible terms.

Finance institutions are not allowed to skimp on financing for small and micro businesses eligible for renewing loans, and small and micro businesses' fees will be paid by small and micro businesses' financing channels.

Also, more social funds are encouraged to support the development of small and micro businesses, as well as financial innovation, according to the new plan.

Such measures are being carried out now as China's private business growth momentum has yet to pick up.

Private business investment, which is mostly small and micro businesses, contributes more than 60 percent of China's fixed assets investment, and private business provides more than 80 percent of the country's workforce.

Yet the sector has experienced a slowdown in growth for the first half of this year due to a variety of reasons, including volatility in the international market.

For the first six months, China's private investment grew by 2.8 percent, triggering concerns from the central government. The government conducted a nationwide review on the reasons behind such a decline.

It was found that the most common reason is that small and micro businesses face increasing difficulties in financing, while financing costs are also a major issue.