China’s government tells banks to ‘increase financial support’ for private firms to aid slowing economy
- Beijing issues rare directive telling lenders and financial regulators to help boost growth after 2018 cooled to its slowest rate in 28 years
- New instructions reflect underlying anxiety among leaders over economic prospects amid the trade war with the United States
China’s top leadership has increased the pressure on lenders and financial regulators by urging them to do more to provide financial support to small and private businesses in a move aimed at keeping the slowing economy on track and maintaining social stability amid the trade war with the United States.
Banks, local governments and regulators have been urged to change the behaviour of commercial banks, who have only been offering lukewarm financial support to private borrowers.
“Financial regulators must enhance supervision, while fiscal authorities also must make full use of fiscal and tax policy and play its role as investor of state-owned financial institutions,” said the joint circular by the Communist Party Central Committee and the State Council.
“All the provincial governments also need to take their responsibilities and take relevant measures to lift the financing support for private firms.”
The key policy guidelines, for example, ask China’s central bank to lower the required reserve ratio so that banks will have more funds available to lend.
On Friday, data showed that new yuan loans in January hit an all-time high at 3.23 trillion yuan (US$477 million), showing the banks are already in a mode of frenzied lending.