China beefs up financial support to stimulate small-business vitality

0 Comment(s)Print E-mail Xinhua, July 04, 2023

BEIJING, July 3 (Xinhua) -- China's central bank is boosting its monetary policy tools to stimulate the vitality of private, micro and small enterprises, as well as the agriculture sector, lending more steam to the recovery of the economy's intrinsic driving force.

The relending and rediscount quota for the aforementioned sectors will be expanded by 200 billion yuan (about 27.72 billion U.S. dollars), according to the People's Bank of China on Friday. The bank said the move is expected to reduce the cost of social financing, promote employment and support the recovery of intrinsic economic momentum.

Targeting key areas and weak links in the real-economy sector, the monetary policy tools initiated by the central bank are widely interpreted by analysts as appropriate and efficient.

"The relending tool is a suitable policy tool for the current economic recovery situation, which still faces pressure," said Ming Ming, chief economist at CITIC Securities.

Ming said that small and micro entities, private enterprises, and some of those operating in the agriculture sector, including farmers and businesses in rural areas, are "in urgent need of policy support."

Dong Ximiao, chief researcher at Merchants Union Consumer Finance Co., Ltd., said that expanding the relending and rediscount quota for the sectors is expected to provide more funds for and reduce the capital cost of financial institutions, and therefore these institutions will be "incentivized" to serve the sectors.

Optimistic about the effect of the central bank's monetary policy tools, Ming predicted that the 200-billion-yuan quota will drive the year-on-year growth rate of social financing, with an increase of about 0.1 percentage points.

The new quota is also expected to improve the operation of micro, small and medium-sized enterprises, as well as stimulating the financing demand of related industries, Ming added.

In recent years, the central bank has given full play to structural monetary policy tools. As of the first quarter of this year, the outstanding relending loans and balance of rediscount nationwide totaled 2.6 trillion yuan, according to the bank.

Looking to the future, analysts expect monetary policy tools to continue picking up steam during the key period of economic recovery.

"The use of structural monetary policy tools will serve as an important way to improve the credit structure," said Liang Si, a researcher at the Bank of China's research institute.

Liang expects the implementation of the tools to provide further support for the green, science and innovation sectors, in a bid to promote the optimization and upgrading of the economic structure. ■

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