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China will reduce real interest rates on loans for micro and small businesses and increase lending to the manufacturing industry to boost innovation and support the real economy, the State Council's executive meeting, chaired by Premier Li Keqiang decided on Wednesday.|
"We will keep the prudent monetary policy neither too tight nor too loose, with anticipatory adjustments and fine-tuning as appropriate, to adapt to the shifting dynamics in the international and domestic markets," Li said.
It was decided that to keep liquidity reasonably sufficient, all the funds released by previous cuts in the required reserve ratio will be used for lending to private, micro and small businesses.
Market-oriented interest rate reform will be deepened to improve commercial banks' loan prime rate mechanism and better harness the rate's role in shaping the real interest rate. Banks will be urged to reduce lending surcharges to lower financing costs for micro and small businesses.
Small and medium enterprises will be supported in bond and note financing. Regulatory and evaluation methods for commercial banks regarding their financial services for micro and small firms will be refined. Financial institutions are expected to significantly increase their financial bonds issued for small businesses this year toward the target of no less than 180 billion yuan ($26 billion).
Comprehensive pilot reforms will be carried out on financial services for private, micro and small firms for three years to explore ways to expand lending to these businesses, lower their financing costs, improve the guarantee and risk compensation mechanisms and further innovate in financial services. The goal is to guide more financial resources to support smaller firms.
"We must use market-oriented reform measures to see that the real interest rate comes down and reforms the transmission mechanism. The purpose of these measures is to deliver concrete benefits to all market players, micro and small businesses in particular, and send a positive signal to the market," Li said.
The meeting also decided on steps to expand the use of intellectual property pledge financing and credit issuance for the manufacturing sector to support innovation, entrepreneurship and manufacturing upgrading. Banks will be guided to formulate separate lending plans and evaluation mechanisms for intellectual property pledge loans.
"We must step up the building of an intellectual property information platform. Intellectual property pledge financing may seem a minor business for financial institutions, yet in practice, it is of vital importance as it boosts entrepreneurship and innovation, and helps with the protection of intellectual property rights," Li said.