China vows better financing for private companies

Full translation of latest govt policy by eight state organs on Monday.

Eight Chinese state organs today/Monday, Nov. 27 issued a joint official document aimed at strengthening financing for China’s private companies, which, according to Chinese President Xi Jinping in November 2018, are responsible for “contributing more than 50 percent of tax revenue, 60 percent of GDP, 70 percent of technological innovation, 80 percent of urban employment and 90 percent of new jobs and new firms.”

Below is a full translation of the document, which is highly technical and may not be interesting to all readers.

Please note that the translation may contain errors and that Pekingnology is NOT a government source.

关于强化金融支持举措 助力民营经济发展壮大的通知

Notice on Strengthening Financial Support Measures to Boost the Development and Expansion of the Private Economy

by People's Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Finance, All-China Federation of Industry and Commerce

Photo by Eric Prouzet on Unsplash

To fully implement the spirit of the 20th National Congress of the Communist Party of China, to meet the Central Financial Work Conference's requirements, and to adhere to the "Opinions of the CPC Central Committee and the State Council on Promoting the Development and Growth of the Private Economy"; to steadfastly uphold the "two unswervinglys" principle (unwaveringly consolidating and developing the public sector of the economy and unwaveringly encouraging, supporting, and guiding the development of the non-public sector of the economy); to guide financial institutions towards the principle of "equal treatment"; to continuously strengthen financial services for private enterprises; and to align financial support for the private economy with its contribution to economic and social development, we issue the following notices regarding relevant matters.

I. Continuously Increase Credit Resources to Support the Development and Expansion of the Private Economy

(1) Clarify the targets and priorities of financial services for private enterprises. Financial institutions in the banking sector should set annual service targets for these enterprises, increase the emphasis in performance assessments on services to private enterprises, enhance financial support, and gradually raise the proportion of loans to private enterprises. Improve organizational structures and product services to better align with the financing needs of private enterprises. Increase support in key areas such as technological innovation, specialized and sophiscated small and medium-sized enterprises (SMEs), green and low-carbon initiatives, and industrial base reconstruction projects. Support technology transformation investments and projects of private enterprises, actively meet the reasonable financial needs of private micro, small, and medium enterprises (MSMEs), and optimize the structure of loans. Increase the tolerance for non-performing loans from private enterprises within reasonable limits, establish and enhance an exemption mechanism (for banking professionals) where due diligence have been taken, ensuring full protection of the motivation and enthusiasm of frontline business personnel [of the banking sector].

(2) Increase support for first-time loans and unsecured loans. Financial institutions in the banking sector should actively undertake initiatives to cultivate and expand first-time loan customers. They should strengthen cooperation with government departments of development and reform and respective industries, federations of industry and commerce, chambers of commerce, and associations. Identify high-quality private enterprises with market prospects, profitability, good credit history, and financing needs. Develop targeted comprehensive cultivation plans to improve the financing accessibility rate for private enterprises. Enhance technology empowerment, develop credit-financing [unsecured] products suitable for private enterprises, promote the “信易贷” "Easy Credit" model, enable the national industry-finance cooperation platform to play its role, and continually expand the scale of unsecured loans.

(3) Proactively carry out financial services based on industrial chains and supply chains. Financial institutions in the banking sectors should explore supply chain decentralization models actively and support private MSMEs within the supply chain by facilitating loans based on business orders, warehouse financing, and other related businesses. Further, improve the functionality of the central invoicing accounts receivable financing service platform and strengthen the application of the CRC (Tianjin) Movables Interest Registry Co., Ltd platform. Promote the regulated development of supply chain bills. Deeply implement the 'one chain, one policy, one batch' financing promotion action for MSMEs. Support the financing of private MSMEs within key industrial chains, advanced manufacturing industry clusters, and special industry clusters of small and medium enterprises.

(4) Proactively ensure continued funding. Encourage lead banks and lead banks of syndicated loans to take a proactive leading and coordinating role for private enterprises that are temporarily facing difficulties yet possess marketable products, promising development prospects, and competitive technologies. Proactively align with follow-up financing needs in advance, adhering to market principles, and avoid abruptly stopping loans, pressing for repayments, withdrawing loans, or severing loans. Implement policies such as the "Notice on Effectively Supporting the Stable and Healthy Development of the Real Estate Market through Financial Measures" (Yin Fa [2022] No. 254), among others, to maintain the stability of essential financing channels like credit and bonds, and to reasonably fulfill the financial needs of private real estate enterprises.

(5) Effectively promote development while preventing risks. Financial institutions in the banking sector should enhance the sustainability of their services to private enterprises and operate with prudence, adhering to laws and compliance. They should improve credit risk control mechanisms, strengthen the supervision of low-cost funds benefiting from preferential policies, and strictly monitor the flows of the funds. Additionally, it's important to reinforce management of related transactions and improve capabilities in penetrating, identifying, monitoring, and warning against such transactions.

II. Deepen the Construction of the Bond Market System, Facilitate Bond Financing Channels for Private Enterprises

(6) Expand the scale of bond financing available to private enterprises. Encourage these enterprises to register and issue various types of financial instruments, including 科创票据 innovation bills under the jurisdiction of the National Association of Financial Market Institutional Investors, 科创债券 innovation bonds under the jurisdiction of the China Securities Regulatory Commission, stock-bond hybrid products, green bonds, carbon neutrality bonds, transition bonds, etc., to further satisfy the capital requirements of private enterprises, especially in areas like technological innovation and green, low-carbon initiatives. Support private enterprises in issuing asset-backed securities to stimulate the revitalization of existing assets. Optimize the registration mechanism for private enterprises' debt financing instruments by adopting the "fast track" approach for the entire registration process. This includes supporting shelf registration issuance to enhance the convenience of financing services.

(7) Fully enable bond financing support tools for private enterprises to play their roles. Encourage China Bond Insurance Co., Ltd., China Securities Finance Corporation Limited, and non-government institutions to adhere to the principles of marketization and legalization. Utilize guarantee enhancement, the creation of credit risk mitigation tools, direct investment, etc., to promote the expansion and augmentation of bond financing support tools for private enterprises and stabilize the existing scale.

(8) Increase investment in bonds of private enterprises. Encourage and guide banks, insurance companies, various types of pension funds, public funds, and other institutional investors to actively and scientifically allocate investment in bonds of private enterprises. Support private enterprises in repurchasing their issued debt financing instruments in a marketized manner, upon the basis of ensuring compliance with information disclosure, fair pricing, fair trading, and other norms.

(9) Explore the development of the high-yield bond market. Research and promote the construction of the high-yield bond market, with a focus on addressing the financing needs of technology-oriented small and medium enterprises. Establish a dedicated platform for high-yield bonds, design trading mechanisms and systems that align with the characteristics of high yields, strengthen the cultivation of professional investors, and enhance market liquidity.

III. Optimizing the Role of Multi-Level Capital Markets to Expand Equity Financing Scale for High-Quality Private Enterprises

(10) Support private enterprises in going public to facilitate financing, as well as in mergers, acquisitions, and reorganizations. Promote the deepening of reform of the registration-based IPO system and strongly back private enterprises in their efforts to issue, list, and refinance. Encourage qualified private enterprises to go public overseas, effectively utilizing both domestic and international markets and resources. Continue advancing market-oriented reforms in mergers, acquisitions, and reorganizations. Examine and refine the "small amount, fast track" review mechanism for these processes. Support private enterprises in enhancing their quality and efficiency, enabling them to grow larger and stronger through strategic mergers, acquisitions, and reorganizations.

(11) Enhance regional equity markets' support services for private enterprises. Encourage these markets to focus their role as private equity markets, steadily expand pilot projects like private equity share transfers and comprehensive subscription rights services, and boost the involvement of private equity funds and securities brokerages. Upon the condition of legal compliance, controlled risk, and commercial willingness, support insurance, trust, and other financial institutions, as well as asset management products, in investing in key construction projects and the unlisted equity of private enterprises.

(12) Enable equity investment funds to play their roles in supporting the financing of private enterprises. Utilize the guiding influence of government funds to encourage more non-governmental capital investment in key industries and areas of private enterprises. Actively foster early-stage investment entities, such as angel investors and venture capitalists, to increase investment in startup-phase private MSMEs. Enhance the investment exit mechanism and optimize the system where the restricted period for listed companies invested in by venture capital funds is inversely proportional to the investment period. Effectively implement the exemption mechanism for state-owned venture capital institutions where due diligence have been taken [in case the investments go sour].

IV. Increase Foreign Exchange Facilitation Policies and Service Provision to Support Private Enterprises in "Going Global" and "Bringing In"

(13) Improve the level of facilitation of current account receipts and payments. Encourage financial institutions in the banking sector to expand cross-border RMB "first-time accounts". Support financial institutions in the banking sector to provide more high-quality private enterprises with facilitation services for foreign exchange settlement in trade, thereby improving the efficiency of cross-border settlement. Support financial institutions in the bankng sector to make good use of domestic and foreign currency settlement policies, and provide high-quality trade facilitation services for new trade formats such as cross-border e-commerce.

(14) Improve cross-border investment and financing facilitation policies. Optimize the fund use and fund management of foreign exchange accounts and capital accounts, improve the facilitation policy of capital account income and payment settlement of foreign exchanges, support qualified financial institutions in the banking sector to carry out digitalized capital account services. Expand the scope of the cross-border financing facilitation pilot for high-tech and specialized and sophisticated SMEs. Support 符合条件的民营企业开展跨国公司本外币一体化资金池业务试点 qualified private enterprises in launching pilot cash pooling programs integrating domestic and foreign currency as multinational companies, so as to facilitate the coordination of domestic and foreign fund transfers and utilization by private enterprises. Orderly expand the scope of the pilot for foreign-invested enterprises to reinvest domestically without registration, improve the convenience for foreign-invested enterprises to carry out equity investment in China and private enterprises to use foreign investment efficiently. Support cross-border equity investment funds to invest in high-quality private enterprises.

(15) Optimize special services for cross-border financial foreign exchanges. Encourage financial institutions in the banking sector to improve the service system and work mechanism for exchange rate risk management, strengthen the multi-party cooperation between the government, banks, and guarantee companies, and reduce the foreign exchange hedging costs of private MSMEs. Continue to innovate the application scenarios and expand the coverage of cross-border financial service platform, and provide online, convenient financing settlement services for private enterprises.

V. Strengthen Positive Incentives to Enhance Financial Institutions' Commitment to Serving the Private Economy

(16) Intensify support through monetary policy tools. Continue to implement a variety of monetary policy instruments to support financial institutions in the banking sector in stepping up loans to private enterprises in key areas. Utilize 支农支小再贷款额度 re-lending quotas for the agriculture sector and small businesses effectively to transmit preferential re-lending rates to private small and micro enterprises, thereby reducing their financing costs.

(17) Enhance fiscal subsidies and insurance and guarantees. Optimize policies regarding guaranteed loans for startups, simplify processing procedures, and promote online service models. Utilize the insurance compensation mechanism for the 首台（套）重大技术装备 initial application of major new technical equipment and 重点新材料 key new materials. Gradually expand the coverage of export credit insurance while ensuring that risks remain controllable.

(18) Expand funding sources for financial institutions in the banking sector. Support financial institutions in the banking sector in issuing 金融债券 financial bonds to raise funds for lending to private enterprises. Banks that substantially support private enterprises should be given priority in issuing various capital instruments to supplement their capital, provided they meet the necessary conditions for the related bond issuances.

VI. Optimize Financing Support Policies to Enhance the Financial Capacity of the Private Economy

(19) Improve the credit incentive and constraint mechanism. Enhance the sharing mechanism of credit information for private enterprises and refine the credit rating and evaluation system for small, micro enterprises as well as self-employed individuals. Allow financial institutions access to enterprise-related credit information, including data on electricity bills, water bills, industry, commerce, tax, and government subsidies, in accordance with laws and regulations, so as to ease information asymmetry. Establish a credit restoration mechanism for correcting dishonest behaviors.

(20) Improve risk-sharing and compensation mechanisms. Utilize the leading role of the National Financing Guarantee Fund system, stabilize the scale of reguarantee businesses, guide government financing guarantee institutions at all levels to reasonably set guarantee rates, actively cultivate “first-time guarantee” private enterprises, and increase credit enhancement support for private small and micro enterprises. Establish a risk compensation mechanism for the National Financing Guarantee Fund, and encourage qualified regions to improve capital supplementation and risk compensation mechanisms for government financing guarantee institutions to further enhance their role in credit enhancement and risk-sharing.

(21) Improve the credit constraint mechanism in the bills market. Support private enterprises to use bills more conveniently for financing, strengthen protection for private enterprises using bills, restrict bill-related business for chronic late enterprise payers, so as to better prevent arrears to private enterprises. Guide bills market infrastructure to optimize system functions, facilitate enterprises' access to information disclosure of bills, and more effectively identify and assess related credit risks.

(22) Strengthen the confirmation of accounts receivable. Encourage entities like government bodies, public institutions, and large enterprises to promptly acknowledge debt relationships when small and micro enterprises request confirmation of accounts receivable. Encourage local governments to adopt various measures to strengthen the confirmation of accounts receivable in small and micro enterprises within their jurisdiction, so as to improve the efficiency of financing against accounts receivable. Promote core enterprises, government departments, and financial institutions to enhance their connections with and promptly confirming accounts through the CRC (Tianjin) Movables Interest Registry Co., Ltd platform, so as to address problems concerning rights confirmation for core enterprises and government departments, and issues concerning risk control for financial institutions.

(23) Strengthen support via tax policy. Deliver on the relevant tax policy for 以物抵债 asset-for-debt swaps. If input invoices cannot be obtained when disposing of assets-for-debt swap properties, allow financial institutions in the banking sector to apply the value-added tax on the difference between output and input as per current regulations, and exempt or reduce deed tax, stamp duty, etc., in the receiving and disposal stages. Promote the implementation of the bad debt write-off management system for financial enterprises, and further support financial institutions in the banking sector in accelerating the disposal of non-performing assets.

VII. Strengthen Implementation and Safeguards

(24) Enhance publicity and interpretation. Financial institutions should actively inform the public of relevant policies, and enrich the forms, increase the frequency, and expand the scope of publicity and interpretation. Proactively inform private enterprises of financial support policies, financial products, and service information. Development and reform commissions, government authorities on industries, and federations of industry and commerce should guide private enterprises through training and other initiatives to operate in accordance with laws and regulations, cherish commercial reputation and credit history, so as to prevent and resolve risks.

(25) Strengthen policy implementation. Financial regulation administrations, development and reform commissions, industry and information agencies, finance bureaus, taxation administrations, federations of industry and commerce, and other departments of local governments should enhance communication and coordination, address bottlenecks and difficulties in policy implementation, strengthen policy supervision, put together examples, enhance publicity and promotion, and improve policy effectiveness. Further enhance statistical monitoring and strengthen policy effect evaluation. Federations of industry and commerce should play a bridging and assisting role in establishing a directory of high-quality private enterprises, promptly delivering it to target financial institutions, and strengthening communication between banks and enterprises. Financial institutions should fulfill their principal responsibilities, promptly formulate specific implementation rules, and accelerate detailed policy implementation.