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China steps up helping private firms out of financing difficulties:
Economic Watch
BEIJING, Oct. 24, 2018 (BSS/Xinhua) — Chinese authorities have decided to
renew efforts to assist private companies facing financing difficulties,
given the importance of those firms to the economy and the job market.
The private sector plays an important role in China’s economy,
contributing more than 50 percent of tax revenue, 60 percent of GDP, 70
percent of technological innovation, 80 percent of urban employment and 90
percent of new jobs and new firms.
Answering questions about economic and financial issues, Vice Premier Liu
He on Friday reiterated China’s basic economic system and the crucial role of
the private sector.
“There must be no irresolution about working to consolidate and develop
the public sector; and there must be no irresolution about working to
encourage, support and guide the development of the non-public sector,” Liu
said.
He added that misunderstanding and deviation existed in implementation,
citing a viewpoint of some lenders that it was safe to provide loans to
state-owned enterprises, but politically risky to loan to private businesses.
“This kind of understanding and practice is completely wrong,” Liu said.
“Liquidity issue has been one of the main problems restraining the
development of private companies,” said Dong Ximiao, a researcher with the
Chongyang Institute for Financial Studies, Renmin University of China.
On Monday, the government decided to facilitate the bond issuance by
private companies, with liquidity support from the central bank to
professional institutions, according to a statement after a State Council
executive meeting.
As private firms are important builders of socialism with Chinese
characteristics, the country will unveil more policies to push for the steady
development of those firms, the statement said.
It was decided at the meeting that funding support will be given to
smaller financial institutions to raise their capability of serving private
firms.
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The People’s Bank of China, the central bank, said Monday on its website
that it will provide guidance for supporting bond issues of private firms by
offering a part of the initial capital.
Following a market-oriented principle, financial institutions will then
focus on assisting the bond issues of companies with good prospects and
technological competitiveness but are in temporary difficulties, the central
bank said.
“The support on bond issues of private firms will be conducive to
stabilizing their expectation and market confidence, and pushing forward the
sound development of the bond market,” Dong said.
The central bank also said that it will increase the quotas of relending
and rediscount to financial institutions by 150 billion yuan (about 21.6
billion U.S. dollars) to ensure that targeted loans can be channeled to
private firms.
This followed an expansion of the same amount in June 2018.
Efforts should be made to intensify research on working out policies
aiming for boosting the growth of private businesses including reducing
burdens from taxes and administrative fees, improving environmental
governance, as well as enhancing technological innovation ability, Liu has
said.
The State Council meeting also said that market access restrictions on
private investors will be further eased, and tax and fee burdens on
enterprises will be further relieved.
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