China will step up relief and assistance to market entities, especially micro, small, and medium-sized enterprises, and strengthen policy reserves, to ensure cross-cyclical adjustments, the State Council's executive meeting chaired by Premier Li Keqiang decided on Wednesday.
Greater support will be provided to micro, small, and medium-sized enterprises, and further measures adopted on top of the existing policies benefiting businesses, to maintain stability of market entities and employment and keep major economic indicators within an appropriate range.
"Supporting market entities, especially the many micro, small, and medium-sized enterprises across sectors, is critical for maintaining steady growth and keeping jobs. Last year's experience shows that such an approach suits China's national conditions and economic structure," Li said.
Relief policies will be strengthened. Re-lending quota for small firms will be increased by another 300 billion yuan (about 46.38 billion U.S. dollars) this year. Local banks will be supported in issuing loans to micro and small enterprises and self-employed individuals. Policies of loan interest discounts and incentives for industries and firms seriously affected by COVID-19 will be fine-tuned. Banks will be encouraged to grant more inclusive credit-based loans to micro and small enterprises.
A risk compensation mechanism for the national financing guaranty fund will be put in place to support guarantee institutions in providing guarantees to micro and small enterprises that lack collateral or credit records.
Financial institutions will be encouraged to roll out bill discount and standardized bill financing, and the People's Bank of China will provide support in the form of re-discount, to alleviate the pressure on micro, small, and medium-sized enterprises caused by payment arrears.
"The micro, small, and medium-sized enterprises create over 90 percent of jobs and generate more than 60 percent of GDP in China. Since the beginning of this year, due to rising production and operation costs caused by commodity price rally, coupled with increasing accounts receivable and impacts of COVID-19 and natural disasters, micro, small, and medium-sized enterprises have been faced with mounting difficulties. Smaller businesses have yet to regain their footing, and we must take this seriously," Li said.
Reform of government functions will be further deepened, to improve business environment and lower institutional transaction costs. Efforts will be made to protect property rights and intellectual property rights, to safeguard fair competition and shore up confidence in development.
Greater support will be provided for starting businesses and pursuing innovations. Arbitrary levy and apportionment of charges will be resolutely prohibited. Sustained efforts will be made for the special campaign against delinquent payments. Localities will be encouraged to roll out targeted relief measures to ease the pressure of rising costs on micro, small, and medium-sized enterprises.
Cross-cyclical adjustments will be made in a holistic approach. Special local government bonds will be harnessed to expand effective investment. Policy reserves will be strengthened in line with the changing international landscape and the need for developing the real economy.
Follow-up policies will be studied and introduced as needed upon the expiration of some policies benefiting enterprises. The capability to cope with difficulties and challenges will be boosted, to maintain steady and sound economic development and stable employment.
"There needs to be in-depth policy research on cross-cyclical adjustments. Given the recent new developments, the support policies about to expire should be better evaluated and preparedness enhanced in policy reserves," Li said.