China needs to unblock, sustain financial channels for private firms

BEIJING (Reuters) – Top Chinese government departments led by the central bank said on Monday that measures needed to be stepped up to strengthen financial support for private companies, including the unblocking and sustaining of funding channels.

Efforts should be made to “unblock” financial channels such as loans, bonds and shares, said the People’s Bank of China (PBOC) in a joint statement with seven other government departments and regulators.

China should also back the listing, mergers and acquisitions, and reorganisation of private enterprises, including supporting qualified companies in going public overseas, according to the statement.

The tolerance for non-performing loans of private companies should also be “reasonably” increased while offering more support for first-time borrowers, according to the joint statement, which outlined 25 measures aimed at bolstering financial support for China’s private economy.

Beijing has been ramping up measures to support the world’s second-largest economy, including a 1 trillion yuan ($139 billion) sovereign bond issuance plan and allowing local governments to frontload part of their 2024 bond quotas.

The PBOC has also implemented modest interest rate cuts and pumped more cash into the economy in recent months, pledging to sustain policy support.

In September, it cut banks’ reserve requirement ratio for the second time this year to free up more funds for lending. Analysts expect another cut by year-end.

Financial institutions should also maintain continuity in their services, even when some companies run into temporary difficulties.

“The principle is to meet the continued financing needs in advance and not to blindly stop, suppress, withdraw or cut off loans,” according to the statement.

($1 = 7.2111 Chinese yuan renminbi)

(Reporting by Ryan Woo; Editing by Christopher Cushing)