SCIO briefing on reform and development of China's banking and insurance sectors in 2020
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E-mail China.org.cn, January 25, 2021
China News Service:
In recent years, the CBIRC has introduced a series of measures to support the development of the private economy. The scale of bank loans to private enterprises also continues to rise. However, during interviews, we found that some private enterprises have encountered difficulties regarding bank financing. I would like to ask why this happens? And going forward, how will the CBIRC continue to support the development of private enterprises? Thank you.
Liang Tao:
By the end of 2020, the balance of loans to private enterprises went up 14% year-on-year to 50 trillion yuan; the balance of inclusive loans to small and micro business was 15.3 trillion yuan with a growth rate that is 18.1 percentage points higher than that of all loans. However, as you say, private enterprises, especially small and micro business, still face financing difficulties in the market.
Private enterprises involve a huge group covering all sectors of the national economy. They include both large and medium-sized enterprises and small and micro businesses. For large and medium-sized private enterprises, some have financing difficulties due to unsound corporate governance and unclear property rights, some due to deviation from their main business lines in unilateral pursuit of group and diversified operation, and some due to an unreasonable financing structure without giving overall consideration to the capital source and cost deadline, where a slight careless step in operation or market fluctuation will lead to tensions in the funding chain. Financing for small and micro businesses with high risks is a worldwide problem that requires the efforts of the whole society to deal with.
The CBIRC will further improve related institutions and measures, focusing on promoting policy implementation. There are already many policies in place and the key is to implement them in a targeted way to support the sound development of private enterprises. They can be classified as follows: First, for private enterprises with clear main business lines, financial soundness as well as a good credit rating of their major shareholders and actual controllers, banking agencies are required to keep checking their primary sources of repayments, reduce heavy reliance on mortgage guarantees and increase credit loans. Second, for private hi-tech enterprises engaged in advanced manufacturing, strategic industries as well as in building independent and controllable industrial and supply chains, banking and insurance agencies are encouraged to significantly increase medium-and-long-term financial support, develop science and technology insurance, continue to improve financial services favorable for innovation, support breakthroughs, fundamental research and application of core and key technologies, and give backing to innovative pledge financing products of intangible assets. Third, for private enterprises that conduct business in accordance with laws and regulations and have the ability for technological innovation, including private Internet-based enterprises, banking and insurance agencies will be supported to continue cooperation with them according to laws and regulations and provide quality financial services to better support the real economy. Fourth, for private small and micro businesses with good market prospects, strong ability to provide employment, and up to the standards of inclusive loans to small and micro businesses, we will continue with the policy of allowing them to postpone principal and interest repayments as well as the credit loan support plan, and guide banking agencies to expand lending for first-time loan renewals, credit loans, and medium-and-long-term loans so as to keep financing costs at a reasonable level. Fifth, for private enterprises facing temporary difficulties, banking and insurance agencies will be guided to adopt specific support measures in accordance with market rules and rule of law and focus on defusing liquidity risks for enterprises. For private enterprises which go in line with the direction of optimization and upgrading of the economic structure and display competitiveness but are facing difficulties temporarily, banking and financial agencies will be encouraged to establish a creditors' committee to strengthen coordination, avoid indiscriminately stopping, withholding or withdrawing loans, and provide necessary financing support so as to help such enterprises maintain and resume normal operation. Sixth, for private enterprises at risk, they are required to seek sound development in the process of solving problems and save themselves by divestment of non-main business assets and focusing on easing risks. Meanwhile, they can turn to local government for help. Banking and insurance agencies will be encouraged, on an equal and voluntary basis, to help enterprises improve their debt structure and corporate governance through a combined use of multiple means such as capital increase to expand stockholding, financial restructuring, merger and reorganization as well as market-based debt-to-equity swaps.
If the economy can be viewed as a body, finance would be the blood; they co-exist and prosper together. In the face of a complex and volatile international and domestic economic situation, China's financial institutions will adhere to the original mission of providing services to the real economy, and promote the construction of a community with a shared future for banks and enterprises, so as to achieve common development and prosperity with private enterprises. Thank you.
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