Economy May 28

More reforms planned to bolster recovery

Financial stimulus measures proposed with changes to regulations restricting lending to coronavirus-scarred small businesses

by Nadeem Xu
More reforms planned to bolster economy
Jobs fairs in China have become a sign of the pain the nation’s economy is suffering from the coronavirus outbreak. New measures are hoped to boost job creation among smaller businesses. 

(ATF) China is to introduce more reforms to help restart its economy after the coronavirus epidemic led to the first contraction in generations.

The Office of Financial Stability and Development Committee under the State Council said Wednesday it will introduce 11 financial reforms. Among them will be more incentives for commercial banks to provide financing to smaller businesses. 

Banks will be evaluated in aspects such as credit allocation, implementation of regulatory policies and product and service innovation and are encouraged to provide differential pricing when lending to enterprises, committee said.

Further reform of small and medium-sized banks will be carried out, such as accelerating capital replenishment, raising funds through multiple channels and combining replenishment of capital with the optimization of corporate governance.

China has embarked on a new round of reforms to open up its financial markets to foreign capital as corporate indebtedness and a trade war with the US threatened to weigh on the economy. The coronavirus pandemic, however, prompted the government to pump trillions of yuan into the financial system through the sale of bonds and loans to stimulate lending to crisis-hit businesses.

READ MORE: China moves to further lower enterprise finance costs

Under the new proposed reforms, governmental financing guarantee institutions at all levels are encouraged to support small businesses and farmers in a bid to share risks and help enterprises to resume work after the virus lockdown shuttered factories and holed tens of millions of workers in their homes for two months.

Further, more efforts will be made to crack down on financial crime and regulatory violations.

The proposals include an already-announced loosing of restrictions to initial public offerings by start-ups on the ChiNext exchange, part of a programme of promoting technology-based “new infrastructure” and digital commerce. 

New measures to improve the credit rating industry will also be introduced.

Wen Bin, chief analyst at China Minsheng Bank, said the measures were aimed at raising the efficiency of capital markets, protecting the rights and interests of investors and maintaining financial stability in order to better support the economic and social recovery.