Since the beginning of this year, government financial agencies and relevant departments have taken actions quickly and proactively to implement the decisions and arrangements of the Communist Party of China Central Committee and the State Council. While efforts have been made to keep financial market liquidity adequate at a reasonable level, a series of measures have been introduced, which are primarily aimed at easing the impact of COVID-19 on micro, small, and medium enterprises (MSMEs). As a result, targeted financial services have been provided for epidemic control, work and production resumption, and the development of the real economy. To further adapt financial support policies to the needs of market entities, the People’s Bank of China, jointly with the China Banking and Insurance Regulatory Commission, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, the State Administration for Market Regulation, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange, recently issued the Guiding Opinions on Further Strengthening Financial Services for MSMEs (Yinfa No.120 [2020], hereinafter referred to as the Opinions).
The Opinions sets down 30 policy measures on seven aspects, i.e., implementing the policies that provide credit support for MSMEs in their resumption of work and production, launching a project on enhancing commercial banks’ capability to provide financial services for MSMEs, carrying out reform to improve the external policy environment and the incentive and restraint mechanism, giving play to the role of the multi-tiered capital market in providing financial support, stepping up efforts to build the MSME credit system, optimizing local financing environment, and enhancing the organization and implementation of relevant work.
It is required in the Opinions that financial institutions fully implement the policies that provide credit support for MSMEs resuming work and production, and launch a project on enhancing their capability to provide financial services for MSMEs. National banks will play a leading role by offering preferential pricing rates at least 50 basis points lower for internal transfers; inclusive loans issued to micro and small businesses (MSBs) by the five state-owned large commercial banks will grow at a rate higher than 40 percent; and development banks and policy banks will ensure that the RMB350 billion of special credit quota is put in place and that preferential interest rates are offered to MSMEs to support their resumption of work and production. Commercial banks will revise up the weight of inclusive finance to over 10 percent in the overall performance appraisal of their branches and sub-branches while significantly increasing credit-based loans and first-time loans to MSBs as well as renewed MSB loans not conditioned on the repayment of the principal due. Insurance companies will be encouraged to explore the role of insurance by offering targeted insurance products to provide loan guarantees.
It is noted in the Opinions that reform will be carried out to improve the external policy environment and the incentive and restraint mechanism for banking financial institutions. A mix of monetary policy tools will be used to enhance countercyclical adjustment and structural adjustment in monetary policy and to guide the ramp-up of credit support for MSMEs by financial institutions. Work will be done to establish or improve the regulatory assessment of commercial banks’ financial services for MSBs, the administrative measures for performance appraisal of financial enterprises, and the assessment of government-backed financing guaranties, and to enhance external assessment and incentive mechanisms. With efforts made to bring out the role of local government-backed financing guaranty agencies in credit enhancement, the coverage of government-backed financing guaranties will be expanded considerably and guaranty fees reduced markedly. The National Financing Guaranty Fund will try to achieve the goal of expanding its re-guarantee business by RMB400 billion in 2020. Moreover, it will cooperate with banking financial institutions on guaranteed bulk lending and increase its share of risk liabilities in the cooperation to 30 percent.
As stated in the Opinions, the multi-tiered capital market will play its part in providing financing support. Measures will be taken to raise net financing via corporate debenture bonds, which is expected to see a year-on-year increase of RMB1 trillion. Financial institutions will issue special financial bonds worth RMB300 billion for MSBs so as to release more resources to support MSB loans. Work will to done to support the listing of qualified small and medium-sized enterprises, accelerate the reform of the ChiNext board, and launch the pilot registration-based system. The rules on issuance and financing on the National Equities Exchange and Quotations, the so-called “new third board”, will be optimized, while venture capital enterprises and angel investors will be guided and encouraged to focus their investments on MSMEs as well as innovative enterprises.