China To Help Private Businesses With Lower-Cost Credit

Lawmakers in China are looking at ways to help private businesses that are having a hard time refinancing debt, reported Reuters.

The report, citing the China Daily, said that policymakers are looking at whether or not it makes sense to provide access to lower-cost credit for private sector businesses. Reuters, citing the official China newspaper, reported financial institutions are being called on to provide increased support for private companies and will have the ability to use financial tools including bonds and bank lending.

The moves are part of an effort by China to prevent a slowdown in the economy due to weakening demand in China and tariffs on exports put in place by the U.S. The tariffs have been punishing, with the impact negative for both countries. Last week Reuters reported that the trade war between the U.S. and China has ended up costing billions of dollars for both sides during 2018, with agriculture feeling the most pain. But it’s not just the agriculture industry that is hurting. A recent study commissioned by the Consumer Technology Association found the tariffs on imported Chinese products resulted in an additional $1 billion per month in costs for the technology industry

Reuters noted that late last week China’s central bank lowered the reserve rate requirements for banks for the fifth time in 12 months. That, noted the report, will provide around $116 billion in new cash banks can use to lend. China is also looking to reduce taxes and fees to boost the economy.  In some areas of China, plans are already being created to better support private businesses. Reuters pointed to Chongqing, the southwestern city and Liaoning, the northeast province. Both announced efforts to help including relief funds that would go to private companies. The newspaper, according to Reuters, said the focus of the central bank was to “liberalize interest rates,” develop a capital pricing system that is unified and give small businesses more access to financing.



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