Chinese authorities are unleashing a huge amount of cash as part of efforts to support financing for private enterprise.
Calculations by the state-owned Economic Information Daily put the volume of bailout funds that are currently entering the market at over 300 billion yuan, provided by financial institutions as well as Chinese local governments.
Analysts say that these funds will be directed at “establishing long-term effective mechanisms for financing by private enterprise.”
The move comes amidst the release of a slew of measures by Beijing to support private enterprise, including targets for lending by banks, with head of the China Banking and Insurance Regulatory Commission pointing that the private sector obtains just 25% of bank loans despite accounting for over 60% of the Chinese economy.
President Xi Jinping lauded the contribution made by private enterprise to the economy at the start of November, while the National Development and Reform Commission (NDRC) has just unveiled five measures to support bond issuance by private sector firms.
The financing difficulties of China’s private enterprises have been highlighted by the frequent liquidation of equity collateral since the start of 2018 leading to plunges in stock prices.
Research from Wanhe Securities (万和证券) estimates that the total volume of equity collateral is currently 4.61 trillion yuan, accounting for 10.32% of the total market value of Chinese A shares.
2.10 trillion yuan of this collateral, or around 45.56% of the total, is “inside collateral,” while there are 3542 A shares companies with unresolved equity collateral positions, accounting for 99.13% of all A-share listed companies.