In response to the severe impact of the COVID-19 pandemic on micro, small and medium enterprises (MSMEs), the financial sector and relevant departments have resolutely implemented the decisions and arrangements of the Central Committee of the Communist Party of China (CPC) and the State Council with swift and proactive actions to introduce a series of measures in support of the expansion of domestic demand, the resumption of production and the security of employment, thus providing targeted financial services for epidemic containment, work and production resumption and development of the real economy. To better accommodate financial support policies to the needs of market entities, further smooth internal and external transmission mechanisms, promote the rapid growth of funding scale and the optimization of the financing structure of MSMEs (including self-employed businesses and owners of micro and small businesses [MSBs] and excluding local government financing platforms, similarly hereinafter), achieve the goal of “greater volume, lower costs, higher quality and wider coverage,” accelerate the restoration of the normal order of life and production, and bolster the high-quality development of the real economy, the following opinions are hereby released.
I. Thoroughly implement credit support policies for MSMEs’ resumption of work and production
1. Make sound arrangements for the deferment of loan principal and interest repayments for MSMEs. Policies in support of the deferment of loan principal and interest repayments should be further improved to provide stronger support for inclusive MSBs. Banking institutions should work harder to implement policies, broaden the coverage of enterprises which can benefit from the policies, and do their utmost to help extend the loans for enterprises that maintained normal business operations before afflicted by the pandemic but are facing difficulties in operations. Differentiated support measures, such as installment repayment of principals and amortization of interests till the delayed repayment date, should be adopted according to the actual conditions of enterprises. Measures should also be taken to raise the response efficiency, streamline relevant formalities and encourage processing through online platforms.
2. Bring into full play the leading role of banks operating nationwide. Nationwide banks need to leverage the policies of across-the-board and targeted required reserve ratio (RRR) cuts, work to increase the volume and cut the rates of MSME loans, roll out detailed schemes and follow up their implementation on a monthly basis. The five large-scale state-owned commercial banks should secure a growth rate of more than 40 percent for the inclusive MSB loans. Nationwide banks should reasonably cut profits in favor of the customers, so as to ensure that the loan coverage of MSMEs is substantially expanded, and their comprehensive financing costs are significantly reduced.
3. Make good use of the policies of central bank lending and central bank discounts. Branches of the People’s Bank of China (PBC) should make proper use of the policies of central bank lending and central bank discounts, guide financial institutions to give priority to MSMEs, and offer assistance to sectors and fields such as poverty alleviation, spring farming and tillage preparation, poultry and livestock breeding, foreign trade, tourism and entertainment, accommodation, catering, and transportation. Stepped-up efforts should be made to enhance supervision and management, so as to ensure the law-based and compliant issuance of loans and avoid misuse of funds. While properly leveraging funds from central bank lending and central bank discounts, small and medium banks are encouraged to beef up support with their self-owned funds, in an attempt to increase credit supply to MSMEs and bring down their financing costs.
4. Put the special credit lines for development banks and policy banks in place. Development banks and policy banks need to put the RMB350 billion special credit lines into full use before end-June 2020, support MSMEs’ resumption of work and production at preferential interest rates, develop their own implementation plan of the special credit lines, and report the use of the credit lines to regulatory authorities on a monthly basis.
5. Reinforce the coverage and support of insurance. Insurance institutions are encouraged to provide targeted guarantee and insurance products for loans based on the impact of the pandemic on MSMEs. Insurance companies are encouraged to differentiate country risks, further expand the coverage of export credit insurance, and enhance the protection for export MSMEs. They should also be supported to explore innovative and effective means of claims during the period of epidemic containment, so as to ensure that clients making claims enjoy timely and convenient services.
II. Carry out the project for enhancing commercial banks’ capability to offer financial services to MSMEs
6. Enhance political stance and shift business philosophy. Heightened attention should be paid to the financial support for the real economy, especially for MSMEs hit by the pandemic, and the sense of social responsibility should be strengthened. In line with the requirements for the supply-side structural reform of the financial sector, commercial banks’ focus of operations as well as credit resources should be shifted from the real estate sector and local government financing platforms to MSMEs and other sectors in the real economy, so as to advance the optimization of incremental credit supply and the restructuring of outstanding credit supply..
7. Improve internal resource allocation and policy arrangements. Large and medium commercial banks should take solid steps to establish the special operating mechanisms for comprehensive services, statistical accounting, risk management, resource allocation as well as examination and evaluation for their inclusive finance divisions, develop special credit plans for MSBs, private enterprises and the manufacturing sector, and delegate the approval authority as appropriate. The cost and revenue sharing mechanism for MSB credit business lines should be reformed. National commercial banks should offer a discount on internal transfer pricing of no lower than 50 basis points, and small and medium banks may, based on their own conditions, offer a discount on internal transfer pricing or provide economic profit subsidies.
8. Optimize the internal performance evaluation system. Commercial banks need to increase the weight of inclusive finance in the performance evaluation of their branches and sub-branches as well as the management. Specifically, the weight of inclusive finance in the comprehensive performance evaluation of branches and sub-branches should be lifted to over 10 percent. The weight of profits from MSB finance should be lowered, while that of services for MSBs should be raised. The internal identification criteria and procedures for due diligence and liability exemption for loan issuances should be refined, so as to ensure that due diligence can be identified when no clear evidence indicates dereliction of duty. Moreover, the proportion of MSB credit practitioners entitled to liability exemption is to be raised gradually, thus motivating them to engage in MSB credit businesses.
9. Substantially increase credit loans, first-time loans and loan extension for MSBs. Commercial banks ought to optimize the risk assessment mechanism, pay focal attention to the examination of the primary source of repayment, and reduce the reliance on collaterals. On the basis of controllable risks, efforts should be made to significantly increase the proportion of newly-issued credit loans. Commercial banks should be urged to raise the number of first-time borrowers. The renewed loans of qualified MSBs should be allowed to be included into the category of normal loans, and commercial banks be encouraged to increase the issuance of medium and long-term loans, in a bid to raise the proportion of renewed MSB loans in 2020 as compared with the previous year.
10. Apply Fintech tools to empower financial services for MSBs. Commercial banks should be encouraged to use technologies such as big data and cloud computing to construct risk pricing and control models and to reform the procedures of credit approval and issuance. The credit information of MSB clients inside banks should be intensively tapped into and integrated, and the connection with external credit information platforms such as those for credit reporting, taxation and market regulation be enhanced, so as to strengthen the capabilities of client identification and credit supply. The remaining hurdles in enterprises’ financing should be removed, so as to truly satisfy the financing needs of MSMEs.
III. Reform and improve the external policy environment and the incentive and restraint mechanisms
11. Strengthen countercyclical and structural adjustment of monetary policy. A sound monetary policy should be pursued and a mix of monetary policy tools such as open market operations and medium-term lending facilities (MLFs) should be applied, in a bid to keep liquidity adequate at a reasonable level in the banking system and guide financial institutions to provide stronger credit support for MSMEs.
12. Bring the loan prime rate (LPR) reform into full play. The spread between lending rates of major banks and the LPR should be incorporated into macro-prudential assessment (MPA), and changes in the spread of loans issued by small and medium-sized banks should be closely monitored. Banking financial institutions should be urged to embed the LPR into activities including internal pricing and transmission, so as to smooth the interest rate transmission mechanism inside banks. In line with the law-based and market-oriented principles, the shift in the pricing benchmark of outstanding floating-rate loans should be advanced in an orderly manner.
13. Optimize external incentives in regulatory policies. The work on amending Law on Commercial Banks should be propelled and the stipulation that guarantees are required for loans issued by commercial banks should be reviewed and revised, so as to facilitate MSBs’ access to credit. The regulatory appraisal of commercial banks regarding financial services delivered to MSBs should be carried out, and the requirement that “the growth of inclusive MSB loans over the year should not be slower than that of total loans and the number of borrowers with outstanding MSB loans should not be smaller than that at the beginning of the year” should continue to be in effect. The tolerance for inclusive MSB non-performing loans (NPL) should be further reinforced.
14. Explore the ways to improve the performance appraisal system of financial enterprises. The administrative measures for performance appraisal of financial enterprises should be revised and improved. In the performance appraisal of state-owned financial enterprises, the requirement for profit growth should be lowered and the issuance of inclusive MSB loans be covered, so as to guide financial enterprises to better implement national macro strategies, serve the real economy and bolster financing support for MSBs. Risk management subsidiaries of futures companies should be encouraged to provide better and more convenient risk management services for MSBs through such means as over-the-counter options and warrant services.
15. Implement preferential fiscal and taxation policies more effectively. Greater efforts should be made to publicize tax breaks, and rewards and subsidies for MSB financial services, so as to ensure that all qualified MSBs can benefit from these policies. Special funding guarantee for the development of inclusive finance should be strengthened to deliver robust fiscal support for the pilot project of comprehensive reform of MSB financial services.
16. Bring into play the role of local government-backed financing guarantors. An appraisal system for government-backed financing guarantees should be established to highlight their nature as quasi-public goods and their policy-oriented features, phase out the requirement for appraising profits, focus on the appraisal of such indicators as achievements in supporting MSBs and agriculture (including the number of new borrowers, amounts, proportions, rates, etc.), lowering of counter-guarantee requirements, timely fulfillment of compensatory liabilities and the ratio of approving first-time loans, and implement the incentive and restraint mechanisms which link appraisal results directly to capital replenishment, risk compensation and remuneration. The guarantee multiplier should be gradually raised, and the average guarantee rate of government-backed financing guarantors and re-guarantors should be lowered to below one percent.
17. Speed up the operation of the state financing guarantee fund. In 2020, the state financing guarantee fund should strive to increase its re-guarantee business volume by RMB400 billion, cooperate with banking financial institutions on bulk guarantee of loans and increase its risk sharing to 30 percent in bulk cooperation. Re-guarantee rates will be exempted for partner institutions’ guarantee business no more than RMB1 million, and the rates for guarantee business over RMB1 million will be halved in the year of 2020.
18. Check up and regulate unreasonable and illicit financing charges. Action ought to be taken to strengthen the supervision and inspection of irregularities committed by banking financial institutions in issuing MSB loans which covertly increase the actual financing costs of MSMEs, such as illegally collecting charges, tying other financial products or other financing services to loans, passing on costs or linking deposits to loans, and any institution that does so should be strictly held accountable and subject to stringent punishments.
IV. Leverage the role of multi-tiered capital market in supporting financing
19. Increase the financing support of the bond market. Efforts should be made to guide the net financing of corporate credit bonds to increase by RMB1 trillion over the previous year, support large enterprises to issue more bonds for financing and ensure more credit resources in support of MSB loans. The examination and approval procedures of special financial bonds for MSB loans ought to be improved by removing barriers in the process and strengthening follow-up management. In 2020, support should also be extended to financial institutions for them to issue RMB300 billion of special financial bonds for MSB loans. Moreover, the supporting role of the debt financing instrument of private enterprises should be further leveraged. The development of credit risk mitigation (CRM) instruments and credit protection instruments should be advanced, and private placements of convertible corporate bond financing instruments should be promoted.
20. Enhance the efficiency of commercial bill financing by MSMEs. Where deferred payment to MSMEs is unavoidable, settlements via commercial bills should be encouraged, as they can better protect the legitimate rights and interests of MSMEs. Work should be done to push for the connectivity between supply chain information platforms and commercial bill infrastructure, speed up well-regulated innovation of commercial bill products and boost the efficiency of accounts receivable financing for MSMEs.
21. Support high-quality MSMEs to get listed or quoted for financing. Eligible MSMEs should be supported to get listed on the main board, the STAR market, the SME board and the ChiNext board. The reform of the ChiNext board should be accelerated and the pilot program of registration-based IPO system be launched. Meanwhile, efforts should be made to optimize the issuance and financing system of the National Equities Exchange and Quotations (NEEQ), introduce the public offering mechanism targeting unspecified qualified investors, lift the limitation of no more than 35 new shareholders for a single private placement, allow in-house self-issuance of petty financing and reduce the financing costs for enterprises. A select tier should be established along with the system of transfer of listing, through which eligible enterprises listed on the select layer for a year may directly transfer to another board for listing. This improves upward mobility of these enterprises, allowing them to grow continuously. Differentiated investor suitability standards should be developed for the basic layer, innovative layer and select layer respectively, and long-term funds including public funds should be brought in to optimize the investor structure.
22. Guide private equity and venture capital to invest in start-ups and small enterprises. The Interim Measures for the Supervision and Administration of Private Investment Funds (Order of the China Securities Regulatory Commission No.105) should be revised to strengthen the differentiated supervision and self-discipline of venture capital funds. The Standards of Venture Capital Enterprises should be formulated to guide and encourage venture capital enterprises and angel investors to focus on investing in MSMEs and innovative enterprises. Asset management products should be encouraged to ramp up support for venture capital and the proportion of equity-based asset management products should be gradually increased. The mechanisms for coordinating investment with lending and insurance between financial institutions such as banks and insurance companies and venture capital enterprises should be enhanced, and market-based cooperation of these entities should be reinforced. Furthermore, policies for the investment of insurance funds in venture capital funds should be further improved.
23. Advance pilot projects of regional private equity market innovation. Qualified regional private equity markets should be chosen to develop pilot programs of system and business innovation. Policies related to the trading systems, financing products and corporate governance in regional private equity markets should be revised. Relevant departments and local governments should be propelled to strengthen policy support and leverage regional private equity markets as a platform of combining polices and measures to support MSMEs. Strengthen the connection between regional private equity markets and platforms of credit reporting, taxation, market regulation and local credit. Commercial banks, securities companies and private equity investment institutions should be encouraged to participate and commercial banks should be motivated to provide relevant financial services.
V. Further develop the MSME credit system
24. Provide stronger guidance on the construction of local credit reporting platforms and comprehensive credit service platforms for MSME financing. Efforts should be made to formulate standards including relevant data catalogues and operation management rules, propel local governments to fully utilize existing credit information platforms, establish local credit reporting platforms and comprehensive credit service platforms for MSME financing and support well-positioned regions to institute local platforms for the operation and maintenance of market-based credit reporting institutions. Based on local service platforms, the implementation of interconnectivity should be accelerated to serve the integrated development of regional economies. Explore building an information library covering high-quality MSMEs, including manufacturing champions of a single category, “small giants” and small and medium enterprises (SMEs) with specialized, skilled, unique and innovation-driven characteristics, and those incorporated into advanced manufacturing clusters of a sector and plans for the technical transformation and upgrading of industrial enterprises. In the meantime, measures should be taken to institute platforms to enable cooperation between industry and finance, strengthen information sharing and comparison, reinforce ties between financial institutions and MSMEs and provide high-quality financing services. Furthermore, the “Easy Credit Loans” model should be improved and promoted.
25. Establish a unified registration and disclosure system for movable property and warranties of title. Promote the reform of the registration of movable property and warranties of title by establishing a unified registration and disclosure system to gradually enable market entities to register movable property and warranties of title on the same platform.
VI. Optimize the local financing environment
26. Set up a sound loan risk incentive and compensation mechanism. Where conditions permit, local governments may establish a “cash pool” for risk compensation in accordance with local conditions, provide discounts and incentives for MSME loans and capital replenishment for government-backed financing guarantee agencies, and assume limited liability to the extent of the capital contributed. Meanwhile, the risk compensation management system should be improved with appropriate custodians and compensation conditions to increase the utilization rate of risk compensation.
27. Support MSMEs to provide supply chain financial services. The cooperation between industry and finance should be supported to press ahead with providing financial services for the entire industry chain, to encourage the development of supply chain financial products ranging from orders, warrants, inventory to accounts receivable financing, and to capitalize on the role of the accounts receivable financing service platform, with an aim to help MSMEs obtain RMB800 billion through accounts receivable financing in 2020. Policy coordination among departments of finance, fiscal affairs, industry and information technology and state-owned assets should be boosted, and the system connection of core enterprises and fiscal departments to the accounts receivable financing service platform should be sped up, so that all state-owned commercial banks and major joint-stock commercial banks can be incorporated into the platform.
28. Facilitate local governments to deepen the reform of delegating power, streamlining administration and optimizing government services. Propel Local governments to thoroughly assume their primary responsibilities for risk and information sharing and repayments of accounts payable. Continue to organize relevant entities to repay accounts payable to private enterprises and MSMEs, and urge government departments and large enterprises to make prompt repayments of unpaid accounts payable according to laws and regulations. Regions where conditions permit should be supported to explore establishing loan renewal centers, first-time loan centers and rights confirmation centers to provide convenient services for the public and enterprises. Work should also be advanced to overhaul unreasonable and illicit charges imposed on the financing of MSMEs by local government departments and intermediaries.
VII. Step up organization and implementation
29. Strengthen organization and promotion. The branches and sub-branches of the PBC and local offices of the China Banking and Insurance Regulatory Commission (CBIRC) should, through approaches such as establishing special groups, strengthen coordination with local departments of development and reform, fiscal affairs and taxation, industry and information technology, commerce and state-owned assets. Special campaigns should be carried out based on local conditions to enhance the capability of commercial banks to provide financial services for MSMEs in the respects of improving internal incentives, strengthening support for first-time borrowers, enhancing service efficiency, reducing financing costs, reinforcing coordination between banks and enterprises, and improving the financing environment.
30. Improve monitoring and assessment. Measures should be taken to explore establishing a well-conceived and objective national MSME financing status survey statistics system and assessment system, and to develop the indexes of MSME financial conditions, which is to be released to the public when appropriate. Sub-branches of the PBC in sub-provincial cities and above should, in concert with CBIRC local offices, work on the establishment of prefecture and county-level assessment systems of regional environment for MSME finance with a particular focus on financial services delivered to MSMEs, financing guarantees, information disclosure and sharing of government departments and repayments of accounts payable within their jurisdictions. At the same time, the assessment results of financial institutions and municipal and county-level governments should be reported to the upper-level departments of such financial institutions and sub-provincial-level local governments and above, when necessary, in order to foster a conducive financial ecosystem.
The People’s Bank of China
China Banking and Insurance Regulatory Commission
National Development and Reform Commission
Ministry of Industry and Information Technology
Ministry of Finance
State Administration for Market Regulation
China Securities Regulatory Commission
State Administration of Foreign Exchange
