Cabinet promises more funds for smaller firms

The central government vowed on Monday to improve financial support to small businesses, as new statistics showed the economy further losing steam amid a crackdown on shadow banking.

At a video conference held by the State Council, China's cabinet, Vice-Premier Ma Kai said that the threshold at which small companies could raise funds directly on the capital markets will be lowered "to some extent" and refinancing of listed small companies should start soon.

"The development of small financial institutions will be further encouraged to improve financial services to small businesses," Ma said, adding that the government intends to allow holders of private capital to set up banks, leasing firms and consumer-finance companies.

The growth of lending to small businesses shouldn't be lower than the average loan growth rate this year, and new loans extended to these businesses shouldn't be lower than the level of last year, said Ma.

"Given that we're continuing a prudent monetary policy and will keep total lending stable, to achieve these goals, the financial sector should restructure its capital and increase the proportion of lending to small businesses."

He said the central bank would guide banks to lend more to small enterprises by using tools such as re-lending, rediscounting and applying differentiated reserve requirement ratios.

People's Bank of China Governor Zhou Xiaochuan said on Monday that the central bank will maintain a prudent monetary stance and increase financial incentives for small firms, which are key job creators and sources of technological innovation.

"Financial support to small businesses will lead to stable and relatively fast economic growth," Zhou said.

China will steadily pursue market-oriented interest-rate reform and the establishment of a deposit insurance system, Zhou said.

Ma also called for the government to reduce the financing cost of small companies by penalizing financial institutions that impose "unreasonable" fees.

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