The difficulties and high costs of financing have long weighed on China’s private businesses and leadership alike. Interviewed by guancha.cn after a central government meeting on November 6, Governor of the People's Bank of China, the country's central bank, Yi Gang admitted that the uniform financing policies of the past made it difficult for private businesses to secure financing and promised there would be no such policies in the future.
When asked the reasons behind the problem, Yi said there were two contributing factors: some businesses are indeed experiencing operation-level difficulties, and financial institutions prefer low risks. This problem is not specific to China, he added. Still, China’s financial services are not accommodative of the private sector, owing to some institutional inadequacies, Yi said, adding that financial institutions must shore these up.
The governor said the central bank would use a three-facet policy portfolio to help expand their financial channels. First, it will add a specific index in the assessment of commercial banks to encourage them to extend credit to private businesses, and provide financial institutions with long-term, medium-cost credit. The State Council decided on October 22 to create a tool for private businesses' debt financing support, through which healthy private businesses with temporarily strained cash flow will gain credit support. The third is a tool for supporting stock equity financing, aimed at reining in the irrational expectations and behaviors of financial markets.
Some past policies have had negative impacts. To avoid these, Yi said the central bank would stress field investigations and solicit opinions from businesses and financial institutions while formulating policy. It will roll out plans in pilot cities first, and set up a reasonable transition period for long-term regulatory measures to help businesses better adapt.
Old Version
