Policy support levels up for private biz

Financial regulators are ramping up support for the private sector with a new wave of policies that encourage banks to develop tailored financial products and expand lending to micro and small businesses, as authorities seek to improve access to financing and bolster private-sector growth.

The Dalian office of the National Financial Regulatory Administration introduced 17 measures in June, aimed at improving financial services to support the high-quality development of the private economy.

The NFRA's Dalian office has instructed banks to incorporate services for private enterprises into their development plans, clarify development goals and priorities, and stimulate lending for private companies through measures such as credit quota allocation, greater delegation of loan approval authority and performance evaluation incentives. Banks are also encouraged to strengthen innovation in financial services.

The regulator also said it would support self-employed businesses and key private investment projects, while guiding banking institutions to improve financing coordination mechanisms for micro and small enterprises, expand loan renewal programs without requiring principal repayment, and crack down on illegal loan intermediaries, thereby helping private enterprises overcome financial challenges.

Last month, the Tianjin financial administration and several other local government departments also jointly introduced a package of measures to improve financial services for the private economy.

They said they would continue to make monetary policy instruments more targeted by coordinating relending programs for private enterprises, fiscal interest subsidies and financing guarantee policies. They will also promote unsecured financing through Tianjin's financing credit service platform to break down information barriers between banks and businesses.

The authorities also pledged to implement a risk compensation mechanism for first-time inclusive unsecured loans to micro and small enterprises, further improve the government-backed financing guarantee system, strengthen financial institutions' willingness to lend, expand inclusive credit to micro and small private enterprises and continue lowering companies' overall financing costs.

The Jiangsu office of the NFRA issued a dedicated policy document introducing 16 measures focused on allocating more credit resources to private businesses, eliminating hidden barriers and improving financial institutions' professional capabilities.

The provincial regulator requires banking institutions to remove implicit barriers and discriminatory provisions for private enterprises, increase the weighting of private-sector financing in performance assessments, appropriately raise tolerance for nonperforming loans, and boost both the outstanding balance and incremental share of loans extended to private enterprises.

One example is a Nanjing, Jiangsu province-based "little giant" company that provided core technology for the action role-playing game Black Myth: Wukong. Despite holding 30 patents, the company struggled to obtain financing because it lacked sufficient collateral, slowing the commercialization of its research and development achievements.

China CITIC Bank's Nanjing branch introduced an innovative credit evaluation system centered on technological value, converting factors such as R&D investment, patent value and market prospects into quantifiable lending criteria. Based on this assessment, the bank tailored a 20 million yuan ($2.94 million) working capital loan for the company.

The branch also leveraged the comprehensive financial service resources of CITIC Group, helping the company successfully list on the Innovation Tier of China's National Equities Exchange and Quotations, a national over-the-counter securities trading platform.

Yang Haiping, a researcher at the Shanghai-based SIFL Institute, said financial institutions often find it difficult to accurately assess the risk profiles of private enterprises, resulting in a mismatch between credit risks and financial returns that weakens banks' willingness to lend.

Yang suggested that local governments play a greater role in establishing government-business risk-sharing mechanisms to ease credit risk pressures on financial institutions. Yang also advised commercial banks to upgrade their risk management systems by developing intelligent customer risk management models, innovating service models such as industrial finance and supply chain finance, and strengthening end-to-end risk control over credit funds through structured, closed-loop fund management.

jiangxueqing@chinadaily.com.cn