China to step up financing support for small firms

FILE PHOTO: A woman works in a small-sized factory producing clothes and hats, in which more than half of its production line has stopped its operation because of a downturn in its business at the Qingyundian industrial zone in Beijing, China, October 19, 2015. C REUTERS/Kim Kyung-Hoon

BEIJING (Reuters) -China will boost financing support for small firms by increasing annual relending quotas by 300 billion yuan ($46.39 billion), the cabinet said on Wednesday.

China will step up support for small- and medium-sized firms to help stabilise economic growth and employment, as rising commodity prices push up production costs and receivables, the cabinet said in a statement after a regular meeting.

The central bank will provide support via rediscount instruments to help ease financing burdens of small firms, while financial institutions will conduct bill discount financing for small firms, the cabinet said.

The government will strengthen its policy reserves and improve cross-cyclical adjustments, state media said, adding that local government special bonds will help drive effective investment.

The government will study and roll out new policy steps or extend existing policies that are set to expire to help firms cope with difficulties, the cabinet said.

China’s factory activity slipped into contraction in August for the first time in nearly 1-1/2 years as COVID-19 containment measures, supply bottlenecks and high raw material prices weighed on output in a blow to the economy.

($1 = 6.4665 Chinese yuan renminbi)

Reporting by Kevin Yao and Beijing newsroom; Editing by Andrew Heavens and Bernadette Baum