SCIO briefing on increasing special local government bonds and strengthening inclusive financial support for micro, small and medium-sized enterprises

SCIO briefing on increasing special local government bonds and strengthening inclusive financial support for micro, small and medium-sized enterprises.

China SCIO April 7, 2020

China Daily:

The COVID-19 epidemic has severely affected industrial chains. What measures has the CBIRC taken to support the coordinated resumption of work and production of industrial chains? Thank you.

Zhou Liang:

Thank you for your question. China is a manufacturing powerhouse occupying an important role in the international industrial chain. Along with the development of the modern economy, the structure and functions of many finished products have become increasingly complicated, making it impossible for one or even several enterprises to complete product design, research and development, production, processing, transportation and sales independently. Products have many parts and their divisions of labor have become more well-defined, which has generated these industrial chains. Analyses show that a leading enterprise in the manufacturing industry is usually supported by 200-300 micro, small and medium-sized enterprises or supporting companies, which have developed into an ecosystem of leading enterprises and other firms on industry chains. The epidemic has dealt a severe blow to China's industrial chains. Since the insufficient supply of certain parts may hold up the production of finished products, China's financial authorities have taken swift moves to improve services related to industrial chains and support enterprises' resumption of production and work.

First, the CBIRC has encouraged banking institutions to provide all-around financial services covering the whole industrial chains of leading enterprises and upstream and downstream small and micro firms based on analyses of information and capital flow as well as logistics.

Second, it has improved support for leading enterprises in industry chains, increased liquidity loans and medium- and long-term loans, encouraged leading enterprises to resort to loans and pay funds in a timely manner to upstream and downstream firms, and allow downstream enterprises to defer loan payments. The CBIRC has asked banks to improve the monitoring of credit funds and enhance the efficiency of payment for upstream enterprises to avoid delayed payment or the default in payment of large enterprises.

Third, it has followed the financing demands of leading enterprises as well as upstream and downstream micro, small and medium-sized enterprises, innovating financial products and services by developing financing through accounts receivable, orders, warehouse receipts and inventory. It is expected to provide 800 billion yuan in accounts receivable financing for micro, small and medium-sized enterprises on industry chains this year. 

Fourth, banks and insurance institutions are encouraged to further stabilize foreign trade through financial services, improve the cross-border financial service chains, cooperate with international financial institutions and provide credit support and financing services to help stabilize the global industrial chain.

Fifth, it has improved the technological level of financial services for industrial chains, mainly by encouraging banks to develop credit software and information systems, and further cooperation with leading enterprises on system matching, information sharing and fund monitoring.

Research findings show that the Industrial and Commercial Bank of China and China Construction Bank have provided all-around financial services for several thousand industrial chains. The CBIRC will continue to provide more targeted and effective financial services for industrial chains, prevent and control risks while ensuring steady growth, and promote a virtuous cycle of financial support and the real economy. Thank you.

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