China to guarantee financing for small firms, rural farming

Chinese Premier Li Keqiang called for better financial guarantees to ease finance burden for small businesses and rural farming.

Li wrote the instructions following a video conference focused on the finance guarantee sector attended by senior government officials.

"Developing financing guarantees is an important tool and a key link in solving the problem of high financing costs facing small firms and the rural sector," Li said.

He called for more policies to develop government-supported financing guarantees and re-guarantee institutions, improvement cooperation mechanisms between banks and guarantee institutions and an increase in financing guarantees for small firms and rural farmers.

The premier also stressed the importance of improving regulations and preventing risks stemming from finance guarantee.

Vice Premier Ma Kai, who attended the conference, said financing guarantee should be better promoted as a "bridge" and "leverage" to bring more financing resources to small firms and rural farming.

Ma urged local governments to spend more on establishing more government-invested-and-controlled financing guarantee institutions, and help them develop by providing favorable tax policies and "risk compensation."

High finance costs have long been a bottleneck for both sectors.

On Nov. 19, the State Council, China's cabinet, pledged a list of measures to ease financing burdens for companies, especially smaller ones, such as relaxing the loan-to-deposit ratio for banks.

Three days later, the People's Bank of China, the central bank, announced the first benchmark interest rate cut in more than two years, citing high financing costs facing many companies as a reason for the move.