China expected to implement credit adjustment
A credit structure adjustment will help Chinese small- and medium-size enterprises survive financing difficulty, according to Liu He, the Office for the Central Leading Group on Economic and Financial Affairs vice director.
In a story in Mondays Peoples Daily, the official newspaper of the Communist Party of China, he said the current credit crunch and cost increases had incurred capital shortage to small- and medium-size enterprises and squeezed some out of business. To promote the development of the bond market and direct financing were key measures to ease the pressure.
Since January, the Peoples Bank of China had raised the ratio of deposits and interest rates, and strictly controlled credit quotas. This threatened small- and medium-size enterprises, said Li Zibin, the China Association of Small and Medium Enterprises president.
Small- and medium-size banks were expected to be set up to increase loans to such enterprises and governments would offer guarantee funds as well, said National Development and Reform Commission (NDRC) sources with the Guangdong Small and Medium Size Enterprises Economy Forum held on Sunday in the southern province.
They added the enterprise income tax threshold would likely be raised from 300,000 yuan (43,736 U.S. dollars) to 500,000 yuan for the healthy and stable development of small- and medium-size enterprises.
NDRC statistics for the first half showed 10 percent of small- and medium-enterprises experienced a growth rate of industrial added-value at nearly 30 percent, 15 percent lower than the same period last year. In addition, about 67,000 small- and medium-size enterprises collapsed because of financing difficulties.
In the first quarter, commercial banks provided loans of more than 2,200 billion yuan, but only 300 billion yuan went to small- and medium-size enterprises, 30 billion yuan less than the same period last year, according to China Banking Regulatory Commission (CBRC) figures.
Liang Hong, a Goldman Sachs China economist, said small- and medium-size enterprises should consider a transition to expand business, apart from relying on government support.
Official Liu added the price and export tax rebate needed modest adjustments to ensure a steady and sound economic development.