To implement the decisions and arrangements made by the Central Committee of the Communist Party of China (CPC) and the State Council on supporting micro and small businesses (MSBs), the People’s Bank of China (PBC), following the decisions of the executive meeting of the State Council, issues a notice announcing that from January 1, 2022, the two monetary policy instruments that provide direct support for the real economy, namely the instrument supporting deferred repayments on inclusive MSB loans and the support plan for inclusive unsecured MSB loans, will continue with modified arrangements.
First, the instrument supporting deferred repayments on inclusive MSB loans will turn into the instrument supporting inclusive MSB loans. In line with market-based principles, financial institutions and businesses may independently negotiate their terms on principal and interest repayments. From the beginning of 2022 to end-June 2023, for inclusive MSB loans issued by locally incorporated banks, the PBC will provide funds in the amount of one percent of their incremental balance of these loans on a quarterly basis, thus encouraging continuous expansion in the inclusive MSB loans. Second, from the beginning of 2022, the support plan for inclusive unsecured MSB loans will be incorporated into the management of central bank lending to support rural development and MSBs. The quota of RMB400 billion of central bank lending, originally arranged for supporting inclusive unsecured MSB loans, may be used on a rolling basis. When necessary, the PBC can further increase the quota. Eligible locally incorporated banks that issue inclusive unsecured MSB loans may apply to the PBC for preferential funding of central bank lending to support rural development and MSBs.
The PBC will give full play to the guiding role of the market-based instruments which continue with modified arrangements. It will foster a positive incentive mechanism to guide locally incorporated banks to expand supply of inclusive MSB loans, including unsecured loans, when banks make their independent decisions and bear risks by themselves. In addition, locally incorporated banks are encouraged to discover new financing demands and enhance their support for MSBs, MSB owners and self-employed businesses so as to promote inclusive MSB loans featuring “increased volume, lowered price and expanding coverage”, and to stabilize businesses and secure employment, thus fostering the overall stability of the macro economy.
