China’s State Council revealed a list of measures designed to widen financing channels for small enterprises, Caixin reports.
The council, led by Premier Li Keqiang, said the new rules will allow some financial institutions to cut their reserve requirement ratios (RRR) to free up capital for lending to small businesses. Loans will also be subject to lower lending rates, to boost borrowing by companies.
Small businesses will also be eligible for more tax exemptions and more loans will come under the category of medium-term lending facility collateral.
Small businesses often struggle to access financing in China as banks often prefer to loan to large and, above all, state-owned companies, which are perceived as less risky clients because they have state backing.
Beijing is trying to rein in credit supplies to these larger entities, which are often massively overleveraged, and instead channel funds toward smaller private businesses that are more efficient at driving growth.
However, the deleveraging drive appears already to be acting as a drag on economic growth, with the National Bureau of Statistics posting the weakest figures in some time in May.
In a statement given from the meeting, the cabinet assured that China will maintain a prudent and neutral monetary policy with ample liquidity.