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China economy

China’s Premier Li Keqiang says loans to small firms should not be ‘wilfully withdrawn’

  • Government will adopt more targeted measures to boost financial support for real economy and tackle financing difficulties faced by small and micro businesses. Xinhua reports
PUBLISHED : Saturday, 10 November, 2018, 12:21pm
UPDATED : Saturday, 10 November, 2018, 11:14pm

China’s premier said loans to small firms should not be “wilfully withdrawn”, and the country should help them tackle their liquidity difficulties, Xinhua reported late on Friday.

“Government departments are encouraged to take a multi-pronged approach,” Li Keqiang was quoted as saying during a cabinet meeting on Friday. “No loans extended should be wilfully withdrawn.”

Li’s comments were the latest from Beijing about efforts to prop up small and medium enterprises (SMEs), which are flailing in the face of a wider clampdown on riskier credit, a slowdown in economic growth and the country’s escalating trade war with the United States.

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China will adopt more targeted measures to boost the financial sector’s support for the real economy and tackle financing difficulties for small and micro businesses, the State Council’s meeting, chaired by Li, decided.

The premier focused on the importance of clear methods to implement help for SMEs and measures to encourage financial institutions to increase their loans to them and cut their financing costs, the Xinhua report said.

Major commercial banks were called upon to cut their average lending rate for SMEs by 1 percentage point in the fourth quarter, compared with the first quarter, and remove unnecessary procedures and surcharges for financing, it said.

The People’s Bank of China, the central bank, has cut the required reserve ratio for commercial banks four times this year, releasing 2.3 trillion yuan (US$331.1 billion).

At the end of September, the value of outstanding loans to micro and small firms was more than 33 trillion yuan, a rise of 11.4 per cent from the same period of 2017.

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Collateral that qualifies for use in the medium-term lending facility will be expanded to cover loans for SMEs with a credit quota of up to 10 million yuan per company, Xinhua said, adding that support will be given to firms for equity and bond financing.

Financial institutions will be encouraged to make SME lending part of their internal performance evaluations and provide incentives to do so, the report said.

The meeting also discussed ways to use government-managed guarantee funds to make more financial resources available to SMEs.