China's central bank, regulators pledge robust financial backing to boost private economy

Five key Chinese regulatory bodies, including the People's Bank of China (PBC) and the All-China Federation of Industry and Commerce, convened a high-level symposium on Friday, pledging robust financial support for the high-quality growth of the private economy.

Outlined in a PBC statement released on Sunday, the symposium called for increased credit allocations to private, small and micro-enterprises and further streamlining of diverse financing channels for private enterprises, including equity, bonds and loans.

Pan Gongsheng, the governor of the PBC, stated during the meeting that the central bank will steer financial institutions to channel more financial resources into the private economy, and implement a moderately loose monetary policy in a bid to maintain ample liquidity, the Shanghai Securities News reported on Sunday.

"The financing costs for private enterprises are expected to remain at low levels for an extended period, thereby creating a favorable macro-monetary and financial environment for their development," Pan said.

Further efforts were called for to strengthen coordination among all parties to improve financing mechanisms and tackle the persistent issues of limited and costly access to funding for private firms.

These remarks come ahead of the two sessions of China's top legislature and political advisory body. On February 17, the central government convened a high-level symposium on private enterprises, signaling strong support for private businesses.

Liao Lin, chairman of the Industrial and Commercial Bank of China (ICBC), said during the meeting that 98 percent of the corporate clients served by ICBC are private enterprises.

The bank would provide high-quality services to private firms, tilting resources to smooth equity, bond and loan financing channels. ICBC plans to offer no less than 6 trillion yuan ($824 billion) in investment and financing to private firms over the next three years, boosting credit and medium- to long-term funding, Liao said.

The symposium underscores that not just banks but the entire financial system will take steps to support private firms, sending a strong signal from the government of top-level commitment to the development of the private economy, Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Sunday.

Xi Junyang noted that the PBC's shift from a focus on macro-monetary policy to structural support for private firms is a breakthrough, with specific measures expected to spur bank lending to these companies.

"It also signals that future policy support will become more systematic and institutionalized, significantly boosting private firms' growth through the capital markets," Xi said.

Support for private enterprises has been a consistent central policy, and this meeting builds on prior efforts to optimize their financing environment - such as offering preferential loan rates and policies for small and micro-sized businesses, Wan Zhe, an economist and professor at Beijing Normal University's Belt and Road School, told the Global Times on Sunday.

Leaders from five private companies and representatives from financial institutions attended Friday's meeting.

Yuan Duoran, a deputy general manager of the Shanghai Stock Exchange, said the bourse would continue expanding equity financing channels for private firms, promoting listings of top-tier private tech companies on the Science and Technology Innovation Board, also known as the STAR Market, and encouraging medium- to long-term capital inflows, Shanghai-based Yicai reported.

Responding to calls for innovative bond market products, Xu Li, chairman and CEO of Shanghai-based AI software company SenseTime, suggested more precise support for AI firms, given their hefty capital needs. He proposed exploring special loans and further opening equity financing options like stock-bond hybrids.

The meeting also urged full implementation of the 25 financial support measures for the private sector introduced in late 2023, alongside efforts to strengthen credit enhancement systems for small and medium-sized private enterprises.

In late 2023, multiple central government departments pledged to bolster private enterprise growth with 25 specific measures to meet their financing needs and advance technological innovation.

Wan emphasized that the high-quality development of the private economy is critical to achieving 2025 economic goals, particularly in employment, taxation, and local finances. She anticipated these policies will boost market confidence, spur investment, and support private firms' transformation and competitiveness in high-tech sectors.

With intensifying competition, the multi-tiered development of capital markets - like the STAR Market - will offer private firms more financing opportunities to thrive, Wan added.

Xi Junyang predicted that with sustained government support, the development of private enterprises this year would reach new heights compared with recent years, playing a key role in driving economic targets.