Li Shiji, who owns a small grain-processing company in Shenyang of northeast China's Liaoning Province, found it difficult to secure business loans for most of his career due to a lack of collateral. But the recent launch of a government-backed financing tool has eased his company's financial pressures, he says.

A government financing guarantee product initiated by Liaoning Province Financing Guaranty in partnership with various banks has helped Li's firm secure 5 million yuan (about 693,385 U.S. dollars) in much-needed loans.

By analyzing common traits among enterprises in specific industries and establishing a standardized, scenario-based financing model, the product effectively enables small and medium-sized enterprises (SMEs) and entities in rural industries to access loans. As of the end of March, the program had supported 16 county-level industrial clusters, providing 430 million yuan in guaranteed loans and sustaining 3,800 jobs.

China has promoted government financing guarantees to help small businesses and rural ventures overcome long-standing lending barriers. Unlike commercial guarantors, public financing guarantee institutions prioritize public welfare over profits, offering credit enhancement, risk sharing and lower fees to facilitate lending to small-scale borrowers.

The country has built a three-tier system to ensure the system fully covers all cities and counties. The National Financing Guarantee Fund, which is the cornerstone of the system, had backed loans totaling 5.81 trillion yuan by the end of March, benefiting approximately 5 million borrowers. Of that total, 98.96 percent was allocated to small or agricultural businesses, significantly reducing borrowing costs.

He Daixin, a finance expert at the Chinese Academy of Social Sciences, noted that government guarantees have become a key countercyclical macroeconomic tool, supporting growing numbers of SMEs and rural entities.

Yet challenges persist, including the vague definition of institutional roles and sustainability concerns. In response to these challenges, Chinese authorities in February introduced new measures to regulate government financing guarantees, setting operational requirements for these institutions.

In effect since March 1, 2025, the regulations mandate that government-backed guarantee institutions should expand services to help enterprises weather challenges while stabilizing and boosting employment. 

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