THE central bank issued guidelines Monday for increasing financial support for smaller companies, including expanding financing channels for them, improving the business environment and implementing favorable tax policies. The notice follows a pledge from the State Council last week to channel more loans to small firms and reduce their funding costs and Sunday’s announcement from the People’s Bank of China on reducing the amount of cash that some banks must hold as reserves. The lack of financing for small firms has been a policy challenge for years. Large State firms have greater access to funds at cheaper rates. Monday’s announcement, made jointly with China’s four other financial regulators, said the government will cut relending interest rates for small and micro enterprises by 0.5 percentage point as part of a broader policy package to ease the financial strain on small firms. The relending and rediscount quotas for small companies, as well as sectors concerning rural areas, will be increased by 150 billion yuan (US$22.96 billion) to support small firms and the agriculture sector, the central bank said. Better mechanisms will be in place to support the issuance of financial bonds by small companies, while banking financial institutions will be encouraged to issue securities backed by small enterprise loans. These measures are expected to provide credit of more than 100 billion yuan, according to the guidelines. Loans for small firms with a credit line of 5 million yuan or less will be included in the scope of collateral for the central bank’s medium-term lending facility operation. From September this year until the end of 2020, interest income for credit up to 5 million yuan, compared with previous 1 million yuan, for qualified small firms as well as individual businesses will be exempt from value-added tax. China will also support the development of venture capital and angel investments to provide more financing channels for small firms, according to the guidelines. Central Bank Governor Yi Gang said at a recent forum that small and micro companies contribute to more than 60 percent of China’s GDP, 80 percent of jobs and 50 percent of the country’s tax revenue.(SD-Xinhua) |