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Policy

China localities pledge support for private businesses

November 19, 2018


Abstract : Authorities in many regions across China have pledged support for private enterprises in a bid to stimulate economic growth and boost job creation.

北京国贸

BEIJING, Nov. 17 (Xinhua) -- Authorities in many regions across China have pledged support for private enterprises in a bid to stimulate economic growth and boost job creation.

Beijing municipal government is offering customized services to help privately-owned firms address a wide array of issues.

Local authorities and social capital have set up a capital pool of 35 billion yuan (5 billion U.S. dollars) to help ease liquidity risks for publicly-traded firms which have pledged shares as collateral for loans, Beijing mayor Chen Jining said in an interview, adding authorities will support private firms to issue bonds to raise funds.

Many firms in share pledge financing face the risk of margin calls when they need to deposit additional money to bring up the margin account to maintenance levels. If they fail to pay up when the stocks prices fall below the level agreed upon, lenders can sell the pledged shares, thus triggering further market volatility.

"The city government in Beijing will clear investment hurdles and open private capital to over 60 projects with a total investment of 100 billion yuan," Chen said.

The Shanghai municipal banking and insurance regulator ordered local lenders to optimize lending policies and eliminate discriminative barriers, to create a level playing field to increase lending to private businesses.

The regulator urged the expanding of financial channels and providing sufficient financial services for private firms at different growth stages.

It also called for more innovative products to increase the availability of loans for small- and micro-sized enterprises and regulate administrative fees and reduce borrowing costs for the private sector.

South China's Guangdong Province, known for its booming private sector, has the largest number of private firms and the highest related tax revenues in China. The province issued a package of policies to support private companies, including lowering the prices of gas and electricity for industry use and favorable loans to small- and micro-sized companies.

In the old industrial base of Heilongjiang, local authorities will continue to improve the business environment. Measures include reduction of taxes and fees, lowering financing costs, creating a level playing field, and a crackdown on intellectual property right violations and investment hurdles.

The spate of measures across the country came after the central Chinese authorities pledged substantial policy support for the private sector, including tax cuts and easier financing.

The private sector plays an important role in the Chinese economy, contributing more than 50 percent of tax revenue, 60 percent of gross domestic product, 70 percent of technological innovation, 80 percent of urban employment and 90 percent of new jobs and new firms.

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Keyword: China-economy Policy private-sector

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