Wangfujing street in Beijing Photo: Wikimedia Commons, BetacommandBot

China is stepping up targeted measures to facilitate fund-raising for micro and small businesses and reduce their financing costs to boost recovery of the economy.

Financial institutions are encouraged to provide 1.5 trillion yuan (US$212 billion) worth of benefits to firms through cuts in interest rates and other methods this year, according to the State Council.

To support such firms, government at all levels have adopted policies such as conducting differentiated supervision, increasing credit availability and mitigating loan risks.

In early June, China released measures to monitor and evaluate commercial banks’ financial services to small businesses, supporting banks to adopt differentiated interest rates for lendings to small firms.

Northeast China’s Jilin Province launched an online financing system for small businesses to address information asymmetry between banks and firms, while service centers for first-time borrowers have opened in places such as Beijing, Chongqing and Gansu to help small businesses first-time loans.

This year, banks in Beijing have granted more than 80 billion yuan worth of first-time loans to more than 34,000 new firms, said Li Mingxiao, director of the China Banking and Insurance Regulatory Commission’s Beijing Office.

Market liquidity

The People’s Bank of China, the country’s central bank, on Friday pumped cash into the banking system via reverse repos to maintain liquidity.

It injected a total of 180 billion yuan into the market, including 70 billion yuan through seven-day reverse repos at an interest rate of 2.2% and 110 billion yuan of 14-day contract at an interest rate of 2.35%.

As 100 billion yuan of reverse repos and 240 billion yuan of medium-term lending facility matured Friday, the operation led to a net withdrawal of 160 billion yuan from the market.

A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.

Financial sector

China’s top banking and insurance regulator pledged sustained efforts to spur faster economic recovery and ensure stable employment and development of enterprises to cushion the Covid-19 impact.

Many enterprises, though hit hard by the Covid-19 epidemic, have promising business prospects and sound credit records, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said at the Lujiazui Forum in Shanghai via video link.

The banks and the government should actively cooperate to forge rescue plans for the firms, he said, adding that China will strengthen the role of policy-based finance in counter-cyclical adjustments. “This year, the loans arranged by policy banks will increase by nearly 1 trillion yuan over last year, with a larger scale of bonds issuance and additional funds.”

The commission is planning to roll out measures to support the development of the capital market, including adding new institutional investors, increasing the issuance of equity asset management products, encouraging new asset management subsidiaries to invest more in securities, and supporting insurance companies in expanding investment in the capital market, Guo said.

Fiscal revenue

China’s fiscal revenue fell to 7.77 trillion yuan in the first five months of the year, down 13.6% from one year earlier, according to the Ministry of Finance. This marks an improvement from the 14.5% drop in the first four months of this year and a fall of 14.3% in the first quarter.

In May alone, China’s fiscal revenue went down by 10% year on year, narrowing from a 15% decrease in April.

Tax revenue totaled 6.68 trillion yuan, down by 14.9% year on year. Revenue from value-added tax, the largest fiscal revenue source in the country, fell by 22% year on year in the first five months.

Value-added tax revenue from the industrial and commercial sectors in May has recovered to almost the same level of the corresponding period last year, reversing a 33.5% drop for the January-April period.

Futures trading

The China Securities Regulatory Commission, the country’s top securities regulator, has approved J.P. Morgan Futures becoming the country’s first wholly foreign-owned futures trading firm.

As part of the country’s efforts to open its financial sector to foreign players, China removed foreign ownership limits for foreign-invested securities companies, fund management firms and futures companies at the beginning of this year.

The commission said it will continue to deepen the opening-up of the futures market and introduce eligible foreign shareholders to futures trading institutions to facilitate their development.

The story was written by Xu Jiangshan and Liu Licong and first published at ATimesCN.com. It was translated by Nadeem Xu.