Date
17 October 2017
Small companies, which account for three quarters of the jobs in China, have a hard time getting loans from banks as they are deemed to be riskier borrowers than their bigger peers. Photo: Bloomberg
Small companies, which account for three quarters of the jobs in China, have a hard time getting loans from banks as they are deemed to be riskier borrowers than their bigger peers. Photo: Bloomberg

China to set up state-owned credit guarantee firm

China plans to set up a state-backed credit guarantee firm to offset some of the risks faced by banks and spur lending where it is needed in a cooling economy, the State Council said.

The cabinet said it wants to quicken growth of the credit guarantee sector to ease funding for small companies and agricultural firms, Reuters reported. 

Credit guarantee firms help borrowers obtain bank loans by guaranteeing a part. As in other countries, small businesses in China have a hard time getting loans from banks as they are deemed to be riskier borrowers than their bigger peers.

The difficulties faced by small companies, which account for three quarters of the jobs in China, have become more pressing as a stuttering Chinese economy subjects the labor market to increased stress, the news agency said.

A state-backed credit guarantee firm will be created and similar companies that are supported by local governments will be prodded into providing basic comprehensive coverage, the cabinet said in a statement on the government website.

Government credit guarantee firms will be offered more tax breaks and no longer be required to be profitable to allow them to back riskier loans taken out by small firms and agricultural businesses, it said.

Separately, a trading platform will be created by the end of June 2017 to allow for the trading of public assets such as mineral rights and state-owned property rights, the report said.

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