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BEIJING, July 23 China will boost support for
small companies and the farming sector by getting commercial
banks and the central bank to disburse more loans to them, the
cabinet said on Wednesday.
Chinese authorities have steadily loosened monetary and
fiscal policies this year to energise the world's second-largest
economy, even though they have avoided saying so in public,
preferring instead to couch any changes as "fine-tuning".
After a weekly meeting chaired by Premier Li Keqiang, the
State Council said many small Chinese companies still face
financing difficulties, which could fuel risk in the economy.
So the cabinet said the central bank would raise the sizes
of its "re-lending" and "re-discount" programmes to step up the
supply of funds to smaller companies and the farm sector.
The central bank's "re-lending" exercise issues loans
directly to commercial banks, which in turn lend to businesses.
The "re-discount" programme requires the central bank to inject
funds into commercial banks by buying their bills. Commercial
banks then lend the money on to companies.
"The total scale of credit supply is not small, but
companies, especially those smaller ones, are still facing
financing difficulties," the cabinet said.
"This not only exerts a heavy burden on firms, it also
weakens the effect of macroeconomic policies and brings about
financial risks," the cabinet said in an online statement.
To alleviate the financing challenges of smaller companies,
the cabinet told banks to cut the time taken to approve loans.
More financing avenues and credit insurance services would
be developed for smaller companies, it said, with financial
institutions created to cater to their needs.
Though the cabinet said China's interest rates market would
be gradually freed up to let banks price their lending risks
better, other remarks suggested that authorities will limit
banks' latitude to run their businesses.
Benchmarks for measuring banks' success will be revised to
ensure they are not only focused on maximising profits and
growing assets, the cabinet said, but gave no further details.
Furthermore, it said, financial institutions must not try to
attract savings by setting excessively high deposit rates.
Unnecessary financial intermediaries will also be cleared from
the market to cut companies' borrowing costs.
"We will continue to implement prudent monetary policy and
keep credit supply growing at an appropriate rate, while
improving the credit structure and intensifying the strength of
the re-lendng and re-discount programmes," the cabinet said.
Pro-growth measures taken by China include lowering the
amount of cash some banks are required to hold as reserves, and
getting banks -- which are controlled by the government -- to
step up lending to a level unseen since the 2008/09 financial
(Reporting by Aileen Wang and Koh Gui Qing; Editing by Clarence