China to defer old-age insurance contributions for industries in special difficulty, employ monetary policy tools to support real economy

BEIJING, April 6 (Xinhua) -- China will adopt the policy of postponing payments of old-age insurance premiums on a time-limited basis for industries experiencing special difficulty, and channel more unemployment insurance funds to support enterprises in maintaining stable payrolls and providing training, according to a decision made at the State Council's executive meeting chaired by Premier Li Keqiang on Wednesday.

The meeting also decided to use monetary policy tools as appropriate to more effectively support growth of the real economy.

The meeting noted that major economic indicators are generally within an appropriate range, yet both the domestic and external environments are faced with growing complexities and uncertainties, some of which are beyond expectations.

The recovery of the world economy remains sluggish. The global commodities markets, including those of food and energy, are experiencing major fluctuations. COVID-19 cases are flaring up across the country. Market entities are facing mounting difficulties. Economic circulation is held back by certain constraints. All these are posing new and greater downward pressure on economic activity. It is imperative to remain confident and, at the same time, take seriously and stay alert to new problems and new challenges.

Li urged efforts to better coordinate COVID-19 response with economic and social development. The decisions of the Central Economic Work Conference and the policy steps laid out in the government work report should be swiftly implemented, and some of the policies may be front-loaded as needed. Ensuring stable growth should be put in a more prominent position, and coordinated steps taken to keep growth stable, adjust the structure, and advance reforms. All these efforts are designed to effectively maintain stable macroeconomic performance.

Keeping major economic indicators within an appropriate range is mainly about ensuring the overall stability of employment and prices. Greater efforts will be made to maintain job security by keeping the operations of market entities stable. Multi-pronged measures will be adopted to ensure unimpeded logistics services, stability of industrial and supply chains, and food and energy security.

On top of promptly introducing policies and supervising their implementation, government departments should swiftly explore policy measures and contingency plans in light of the evolving circumstances, and roll out measures that are conducive to anchoring market expectations. Local authorities should adopt more outcome-based measures informed of local conditions such as cutting or waiving rents.

With businesses severely impacted, and some even halting production or temporarily closed, greater efforts must be made to provide relief to struggling enterprises and meet the basic goal for employment.

"The most pressing challenge facing industries in special difficulty is from payments of unemployment insurance and workplace injury insurance premiums, as well as old-age insurance premiums," Li said. "What the government can do is to have these payments deferred for now, and adjust and adapt the policy as the situation evolves."

For the catering, retail, tourism, civil aviation, highway, waterway and railway transportation industries, policy to defer payments of old-age insurance premiums will be implemented during the second quarter of this year, to alleviate the financial burden of these industries, especially micro, small and medium enterprises as well as self-employed households.

The policy of expanded scope of unemployment insurance benefits will remain effective on a time-limited basis. By the end of this year, all urban and rural unemployed people who are in the scheme will continue to receive unemployment subsidies, and all unemployed migrant workers in the scheme will receive provisional living allowances.

The proportion of refunding unemployment insurance premiums for small firms that make no cuts or minimal cuts to staff numbers will be increased, from 60 percent to as high as 90 percent for eligible localities.

In addition, localities will be allowed to take four percent from the balance of the employment insurance funds to support vocational training programs, and provide one-off employment and training subsidies to hard-hit small firms which are temporarily unable to continue normal production and operation.

The meeting also required agile use of monetary policy tools as appropriate and better leveraging their role in adjusting both the monetary aggregate and the monetary structure, so as to provide robust support to the real economy.

"Financial services, which are both irreplaceable and critically important, must stay oriented toward the real economy. Under the current situation, market-oriented and law-based methods will be adopted to encourage financial institutions to deliver more benefits to the real economy," Li said.

The meeting urged greater efforts to implement the prudent monetary policy to keep liquidity reasonably sufficient. Re-lending for agricultural and small enterprises will be increased, and instruments to support inclusive loans to micro and small businesses will be harnessed to expand the volume and coverage of financing for micro, small and medium enterprises while lowering costs.

"Over the past years, we refrained from flooding the economy with mass stimulus. We must explore every possible means to anchor expectations and boost consumption and investment. This cannot be done in the absence of financial support. More market-based approaches should be employed. Relying solely on public finance is unsustainable," Li said.

Policies on providing financial support for consumption and effective investment will be explored. Financial services for new urban residents will be enhanced, and those for government-subsidized housing improved. Financing needs of key projects will be met as a matter of priority. Efforts will be made toward a fairly rapid increase in medium- and long-term loans to manufacturers.

Financing in key sectors and areas of weakness will be supported. Targeted re-lending arrangements for technological innovation and elderly-care services will be set up, and the People's Bank of China will provide re-lending support for 60 percent and 100 percent of the loan principals respectively.