China to step up bank reserve ratio cuts to help small firms

FILE PHOTO: Chinese 100 yuan banknotes are seen in a counting machine while a clerk counts them at a branch of a commercial bank in Beijing, China, in this March 30, 2016 file picture. REUTERS/Kim Kyung-Hoon/File Photo

BEIJING/SINGAPORE (Reuters) - China will step up its policy of targeted cuts to banks’ required reserve ratios to encourage financing for small and medium-sized businesses that play a key role in economic growth.

Beijing has been urging banks to continue lending to struggling businesses, especially smaller private concerns that account for more than half the country’s economic growth and most of its jobs.

In a detailed policy document published on the central government’s website late on Sunday, the State Council said China will also accelerate initial public offerings for small and medium-sized enterprises (SMEs).

Financing channels for SMEs will be further expanded to help lower their funding costs via preferential monetary policies and easier access to capital markets, the document said.

China will also focus on supporting rediscounting of small bills -- worth 5 million yuan ($744,247) or less -- as a way of helping small firms secure financing.

In addition, bank loans to SMEs with credit lines of 10 million yuan or less will be eligible for use as collateral against the central bank’s medium-term lending facilities.

Accelerated approvals for IPOs by smaller firms will help to encourage direct financing and such companies will be encouraged to list on the main over-the-counter equity board.

In debt financing, China will promote high-yield bond market and private debt placements, and provide more tools, such as to help mitigate credit risks, to help SMEs raise capital and ease liquidity pressures.

Reporting by Chen Aizhu in Singapore, Coco Li, Chen Yawen in Beijing, Samuel Shen in Shanghai; Editing by Catherine Evans