Chinese Central Bank Says Small Enterprises Comprise “Half the Economy,” Calls for Greater Financial Inclusion

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The People’s Bank of China (PBOC) has made another call for greater financial inclusion to support the development of small private businesses.

“Stabilisation of micro, small and medium-sized enterprises is stabilisation of half the economy,” said PBOC in an official opinion piece. “It is stabilisation of employment and stabilisation of living standards.

“PBOC considers work for protecting market actors to be the priority of priorities, and is planning financial support measures to fully assist micro and small-market actors to endure difficulties and develop.”

PBOC highlighted the unveiling of a slew of measures to support financial inclusion for small businesses since the start of the COVID-19 pandemic.

These include 1.8 trillion yuan in reloan and rediscount quotas in 2020, and a further increase in the small-business support reloan quota of 300 billion yuan in 2021, in tandem with reductions to the reserve ratio to unleash long-term funds for small business lending.

In June 2020 PBOC launched its loan payment deferral plan for micro-and-small businesses, providing deferrals on repayments for 16 trillion yuan in loans, and issuing a further 10.3 trillion yuan in financial inclusion micro-and-small enterprise loans.

PBOC also hailed efforts to “guide financial institutions to use rapid loan review and approval procedures, employ fintech, actively develop online lending products, and promote active credit extension, to raise the efficiency of micro-and-small enterprise financing.”

As of the end of January 2022 the financial inclusion micro-and-small loan balance was 19.7 trillion yuan, for a year-on-year (YoY) rise of 25.8%, while the number of financial inclusion micro-and-small loan recipients had risen to 48.13 million, for a YoY rise of 45.5%.

In 2021 the average interest rate for financial inclusion micro-and-small loans was 4.93%, for a decline of 22 basis points compared to the average level of 2020.

PBOC said that the next step would be to “continue to effectively implement financial inclusion policies that have already been unveiled; drive innovation in financial products and services; optimise the financial environment, expand strong support for services sectors facing difficulty; better satisfy the rational financing demand of micro-and-small enterprises, and support the growth of micro-and-small market actors.”