China to extend direct-benefit monetary policy tools
China will prolong the policies on inclusive loan repayment extension and the credit loan support program for smaller businesses, with a view to keep the main economic indicators within an appropriate range, maintain the continuity, stability and sustainability of the policies, spur vitality of market players and anchor market expectations, the State Council executive meeting chaired by Premier Li Keqiang decided on Monday.
Competent departments devised two monetary policy tools this year, in an effort to funnel intensified, direct support for the real economy and help tide businesses over difficulties. That is, the loan extension which encourages local banks (namely, urban and rural commercial banks and rural credit cooperatives) to provisionally defer smaller businesses’ inclusive loan repayments with incentives in place, and the inclusive credit loans which provide local banks with concessional funding support, the Xinhua news agency reported.
The implementation of the aforementioned policy tools combined have achieved remarkable results, benefiting over 3.1 million smaller market entities, and playing a positive role in alleviating financial pressure on enterprises, ensuring market entities and securing employment.
“This year, China’s economy is able to achieve positive growth. This is attributable to financial institutions’ intensified support for micro, small and medium-sized enterprises,” Li said. “The Central Economic Work Conference has underlined that necessary support for economic recovery shall be sustained, with well-calibrated and more effective policy operations.”
Attendees at the Monday meeting agreed that the economy is steadily returning to normal, and required continued efforts to help address the pressing concerns facing enterprises regarding their production and operation, and to ensure proper policy transition and adjustment.
It was decided at the meeting that the provisional deferral policy for both principal repayment and interest payment on smaller businesses’ inclusive loans will continue to be executed in the first quarter next year, and loan repayment further extended within a proper time frame. Inclusive loans granted to micro and small businesses will be extended as much as possible in line with market principles and upon consultations between enterprises and banks.
Incentives will be put in place for local banks that provide inclusive loans for micro and small enterprises with a deferred repayment period of no less than six months. The incentives will remain at 1 per cent of the loan principal.
Those at the meeting also decided that the inclusive credit loan support program will be extended from the end of this year as appropriate. Concessional financial support at 40 per cent of the loan principal will continue to be given to eligible local banks for their issuance of inclusive credit loans to micro and small enterprises.
“Implementation and appropriate extension of the above-mentioned direct-benefit monetary policy tools will help small and micro enterprises better respond to changes at home and abroad and realise stable recovery of production and operation,” Li said.