China vows ‘protection’ of small businesses, with US$46 billion worth of new loans on tap

China is again granting financial institutions billions in cheap capital to be loaned out – a strategy employed last year when 1.8 trillion yuan worth of such ‘relending funds’ were offered

Move is in line with Beijing’s ‘cross-cyclical’ economic policy offering support for essential parts of the economy rather than massive stimulus

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China’s small businesses have seen their revenues recover very slowly and are particularly susceptible to rising production costs and bad debt. Photo: Bloomberg

Published: 7:17pm, 2 Sep 2021Updated: 10:45pm, 5 Sep 2021

In yet another sign that its economic strategy is focused on the long game, Beijing has vowed to provide 300 billion yuan (US$46.4 billion) in new loans to the nation’s small and self-employed businesses – many of which are in desperate need of help.

Rather than going all-out with loose fiscal stimulus measures, this move reinforces the central government’s “structural” and piecemeal support for specific and essential parts of China’s economy as it heads into what economists say is a likely slowdown in the coming months.

“The key to economic and employment stabilisation lies in the protection of small and medium-sized enterprises,” the State Council, China’s cabinet, said after its executive meeting on Wednesday. “We need to take further measures to protect market entities and jobs and ensure that growth in a reasonable range.”

Small and medium-sized enterprises, which employ more than 80 per cent of the urban workforce, continue to struggle during the prolonged pandemic, especially after recent outbreaks of the Delta variant resulted in further lockdowns and made consumers more apprehensive about spending.

Smaller businesses have seen their revenues recover very slowly and are particularly susceptible to rising production costs and bad debt.