China to lower firms’ funding costs

China’s State Council pledges to help enterprises reduce their funding costs. The measures include giving banks more flexibility to lend to the enterprises.

The Chinese parliament announced on Wednesday in a statement after a meeting that the banks will be given “more flexibility in the loan-to-deposit ratio”, which currently requires them to lend no more than 75 percent of their deposits.

The government will also amend the mechanism to assess the performance of banks to avoid them “charging unreasonably high interest rates” on firms, and discourage them from “loving the big [firms] and hating the small [firms]” when the banks decide to whom they should lend credit.

The threshold for small enterprises to list on equity markets will also be lowered, said the council, as a requirement for firms to have been profitable for a period of time before they list will be removed.

Separately, the Chinese parliament also announced late on Thursday 10 directions to support the development of the small companies including encouraging large banks to provide more financial services to small companies.

The government will also purchase more products and services from small companies and offer them free consultancy and training services, the Thursday statement said.