The Chinese central bank has led the issuance of new rules for firming up the supply of financing to micro, small and medium-sized enterprises (MSME’s) in China.
On 2 June the People’s Bank of China (PBOC) issued the “Guidance Opinions Concerning Further Strengthening Micro, Small and Medium-sized Enterprise Financial Services” (关于进一步强化中小微企业金融服务的指导意见).
The Opinions were drafted by PBOC in collaboration with a slew of other central government authorities, including the China Banking and Insurance Regulatory Commission (CBIRC), the National Development and Reform Commission (NDRC), the Ministry of Industry and Information technology (MIIT), the Ministry of Finance, the China Securities Regulatory Commission (CSRC) and the State Administration of Foreign Exchange (SAFE).
According to PBOC the Opinions provide 30 policy measures that cover seven areas including:
- Implementation of loan support policies for MSME’s resuming work and production following COVID-19;
- Improving the ability of commercial banks to provide financial services to MSME’s;
- Reforming and improving the external policy environment and incentive and restraint mechanisms;
- Employing the financial support role of a multi-tier capital market;
- Strengthening the creation of an MSME credit system;
- Optimising the local financial environment;
- Strengthening organisation and implementation.
Key measures for the Chinese banking sector as proposed by the Guidance Opinions include:
- National banks playing a “leading role” by providing internal transfer pricing benefits of no less than 50 basis points;
- The big five state-owned banks achieving growth in financial inclusion micro-and-small enterprise loans of at least 40%;
- The development and policy banks making use of 350 billion yuan in special loan quotas, and supporting the resumption of work and production by MSME’s via discount rates;
- Commercial banks increasing the weighting of financial inclusion in integrated assessment of branch banks to at least 10%;
- Commercial banks significantly increasing credit and loans for micro-and-small enterprises;
- “No principal repayment” for the continuation of certain loans.
The Guidance Opinions call for the “integrated use of multiple monetary policy tools, and the strengthening of the counter-cyclical adjustment and structural adjustment function of monetary policy.”
In 2020 the National Financing Guarantee Fund Company (NFGFC) will “endeavour to increase its re-guarantee operations by 400 billion yuan, and cooperate with banking sector financial institutions to undertake batch loan guarantee operations, increasing the share of risk liability in batch cooperative operations to 30%.”
With regard to China’s capital markets, the Opinions call for guiding an increase in net financing by means of corporate credit-category bonds of over one trillion yuan compared to 2019, and the issuance of 300 billion yuan in micro-and-small enterprise special finance bonds to support micro-and-small enterprise loans.
Chinese regulators will accelerate reform of the ChiNext Board (创业板) in Shenzhen and the launch of a trial registration system, as well as optimisation of the New Third Board system to encourage venture investors and angel investors to focus on investing in MSME’s.