SCIO briefing on work of supporting the development of micro, small and medium-sized enterprises and assisting self-employed business owners

The State Council Information Office held a press conference on Feb. 27 in Beijing to introduce the work supporting the development of micro, small and medium-sized enterprises and assisting self-employed business owners. February 28, 2020


I have two questions. The first is how is the actual situation of those SMEs and self-employed business owners that did not fully resume work and production? Are there any statistics? And the second, are local small-and-medium sized banks capable of supporting SMEs? Thank you. 

Zhang Kejian:

Thank you for your questions. As I just mentioned, there are huge numbers of SMEs which are widely distributed across the country and their situation is complicated. It is not easy to get comprehensive and accurate understanding of the situation of SMEs. In order to better understand their current situation , we conducted a questionnaire for SMEs regarding their work resumption and also asked the China Academy of Industrial Internet to analyze the situation of SMEs using big data. 

According to the monitoring data of 2.2 million SMEs using cloud platform, with the implementation of a series of preferential policies, there have been several positive changes although the rate of work resumption is still not high. 

First, the rate of work resumption has been steadily increasing. The rate of work resumption on Feb. 26 was 32.8 percent, an increase of 3.2 percent point over than on Feb. 23. 

Second, the work resumption rate of SMEs in the manufacturing industry increased quickly led by industrial chains of large enterprise. The work resumption rate of these enterprises on Feb. 26 was 43.1 percent, an increase of 6.2 percent point over that on Feb. 23. Meanwhile, the advantages of online offices and online education services have become noticeable. The work resumption rate of SMEs in industries of information transmission, software and information technology has surpassed 40 percent.

Third, the work resumption rate of SMEs has increased steadily in each province, with most increasing by about 1 percentage point per day. At present, the work resumption rate of SMEs in seven provinces surpassed 40 percent .

In general, the measures designed to support SMEs have resolved some problems to some extent. However, compared to sizeable enterprises, these SME's are more vulnerable to risks and are more affected by the epidemic, and face more difficulties. The epidemic has led to decreased orders, delayed resumption of normal operations, higher cost, and financial strain. The capital and supply chains create dual pressure on them. Some enterprises want to resume work as soon as possible to cut their losses, but they also worry about the risks. They are caught in a dilemma.

Next, we will focus on the following three tasks:

First, it is necessary to carry forward work resumption in an accurate way. We will ensure local governments take their responsibilities to set up a special aid mechanism, provide necessary material support for SMEs, simplify the approval process and help SMEs resume operation in batches. We will send liaison men to key provinces and cities in the next few days. These people will set off tomorrow. They will track and learn the resumption work in key industries and key enterprise, helping resolve problems, especially those of a cross-departmental and cross-regional nature.

Second, it is necessary to reduce the burden on enterprises. We will work with other departments to ensure implementation of favorable policies toward SMEs. We will also continue to clean up debts governmental departments and large state-owned enterprises owe to SMEs, thus reducing their financial pressure.

Third, with sizeable enterprises playing leading roles, we will mobilize SMEs resume production while implementing epidemic prevention and control work. We encourage SMEs to promote and apply information technology, share cloud computing resources, adopt the method of online work, carry out new modes such as collaborative R&D, remote operation and online services. Thank you.

Liu Guoqiang:

I want to add something about small and medium-sized banks. On the one hand, they are allowed to increase their lending rate by 50 basis points above the Loan Prime Rate to 4.55%. The question is: Is there any incentive for the banks to lend when the rate is increased to 4.55%? According to our judgement, there is an incentive for banks to lend because of lowered cost. The central bank now provides re-lending funds to small and medium-sized banks at the rate of 2.5%. When banks issue loans to their clients at the rate of 4.55%, there will be an interest-rate spread of more than 200 basis points, which provides fair room for the banks. On the other hand, we will conduct assessment and encourage banks to implement the lending, while we are trying to hammer out some supportive policies. Just as mentioned, we are replenishing capital to small and medium-sized banks, and granting them support in taxes and finance as well.

This question concerning the policy is very important, but it is hard to give a very clear answer at present. The State Council held an executive meeting the day before yesterday, and we made assignment accordingly yesterday afternoon, so it has just begun. Our plan is good, but we have to keep a close watch before we know how it works. Next, we are going to improve policies based on concrete conditions, and we hope our media friends will keep track of them, raise questions, and give suggestions. That is my answer about the incentive of small and medium-sized banks.

The other question is about sufficiency. There are two categories of re-lending. One category is the 300 billion yuan dedicated to anti-epidemic supply manufacturers. There is a surplus now, and with more companies added to the list every day, the loans are also increasing. Now, we see no need to make any adjustment, as long as we make full use of the 300 billion yuan. The other category is the 500 billion yuan for the quota of re-lending and rediscount. If the sum proves insufficient, we will consider increasing the quota. There may be another scenario, that is, as more enterprises resume operation, there will be more equity funds on the market. Then, we may not need so much capital in the future. We will also keep an eye on the policy and continue to optimize it. Thank you.

Xiao Yuanqi:

With regard to the second question you just mentioned, in addition to Mr. Liu's explanation, I would like to add some comments. Indeed, as you said, local MSMEs are the main customers of local small and medium-sized banks, and they are also affected most by the epidemic. Therefore, they definitely have some impact on small and medium-sized banks, mainly those in seriously affected areas.

Nonetheless, brick-and-mortar businesses were affected by the epidemic for only one month or so. There is a time lag for passing the effect on to local small and medium-sized banks. They are still capable judging from the current indicators of our small and medium-sized banks. Their capital adequacy ratios range from 12% to 13%. The liquidity ratio, especially the liquidity coverage ratio and the net stable funding ratio, are all over 100%. Therefore, from the perspective of liquidity and capital, they have the ability to further provide financing and other financial services for MSMEs. However, with worst-case scenarios in mind, we must be forward-looking, and we must consider if these small and medium-sized banks have the ability to provide support in the future. Thanks to the buffer period, we can take some measures in advance. Take the special re-lending program and other measures introduced by the People's Bank of China as example. The China Banking and Insurance Regulatory Commission requires that the repayment of principal and interest due during this period can be extended to June 30, and the period can be further extended for individual cases. These measures aim to keep the capital chain of the main customers of small and medium-sized banks from breaking. In terms of financial aspect, most affected MSMEs are seeing tight liquidity and limited sources of capital chain. We have tried every means to prevent capital chain ruptures among these companies. Such measures aim to support these enterprises who used to be main customers of these banks to continue their business.

In the future, we will further support small and medium-sized banks by opening green channels for capital replenishment and speeding up the introduction of new strategic investors. Other departments and local governments will also take corresponding measures to support small and medium-sized banks, so that they can better support MSMEs. Thank you.

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