The development of the private economy in China has received a boost with the implementation of favorable policies aimed at guiding more financial resources towards this sector. Experts believe that these policies are crucial in supporting the growth and success of private enterprises.
The private economy is considered a significant achievement in the socialist market economy, promoting economic and social development. It plays a vital role in stabilizing growth, promoting innovation, increasing employment opportunities, and improving people’s livelihoods. To ensure its development, the financial sector has a responsibility to provide support.
Starting in July of this year, various state departments in China have introduced a series of financial measures to aid the private economy. For instance, the “Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting the Development and Growth of the Private Economy” emphasizes the need to enhance the financing support policy system. Additionally, the People’s Bank of China and the State Administration of Foreign Exchange held a work conference in the second half of 2023 to optimize the financing environment for private enterprises. The People’s Bank of China also organized a symposium on financial support for the development of private enterprises, where Pan Gongsheng, Secretary of the Party Committee and Governor of the bank, outlined plans to guide more financial resources towards the private economy.
Pan Gongsheng highlighted the importance of implementing prudent monetary policies, maintaining reasonable liquidity, and strengthening the coordination and cooperation of financial, fiscal, and industrial policies. The People’s Bank of China also intends to formulate and issue guidance documents for financial support to private enterprises. Commercial banks are encouraged to optimize their internal control management systems, enhance policy publicity and interpretation, and promote proven strategies. Local governments are urged to proactively address outstanding accounts of enterprises. Furthermore, efforts will be made to expand and enhance private enterprise bond financing support instruments, as well as strengthen the financial market to better support the development of private enterprises.
Experts have praised these measures, noting that they will boost confidence and expectations among private enterprises and entrepreneurs. They anticipate that these policies will facilitate the healthy growth of the private economy and contribute to the country’s economic recovery, high-quality development, and common prosperity.
Dong Ximiao, chief researcher of China Merchants Union Finance, emphasized the vital role of financial support in driving the development of private enterprises. He urged a continued focus on credit support, direct financing, and credit enhancement systems. Dong also proposed specific measures to address the financing challenges faced by private enterprises, advocating for increased credit support from the banking industry. This includes optimizing the banking institution system and developing small and medium-sized banks to better assist private enterprises. Additionally, he suggested that banks should actively address the “difficulty in first-time loans” and increase credit loans while managing risks and meeting the needs of private enterprises.
Analysts believe that to foster private sector development, a greater emphasis should be placed on direct financing. Relevant departments should improve the stock issuance and refinancing system, streamline the IPO and refinancing review processes for private enterprises, and enable market mechanisms to play a more significant role. This will enhance private enterprises’ ability to raise funds in the capital market.
Lou Feipeng, a researcher at the Postal Savings Bank of China, emphasized the importance of utilizing the potential of the capital market to provide long-term funding support to private enterprises. With a large number of private enterprises across various industries and stages of growth, there is a pressing need to tap into the capital market to fulfill their financing requirements effectively.
Addressing the challenges of difficult and expensive financing for private enterprises, Dong Ximiao called for the optimization of credit enhancement systems and risk-sharing mechanisms. He proposed the establishment of a private enterprise risk compensation fund to address the issue of lacking information, credit information, and guarantees for private enterprises. Gradually reducing the guarantee fee rate will help alleviate financial burdens.
Recent data reflects the progress made in promoting financing for private enterprises. The People’s Bank of China, together with financial institutions, has implemented policy measures resulting in increased financing volume, expanded scope, and reduced prices for private enterprises. Inclusive small and micro loans saw a year-on-year increase of 26% to reach a balance of 27.7 trillion yuan by the end of June 2023. The number of small and micro credit customers also grew by 13.3% to 59.35 million. Additionally, since November 2022, the private enterprise bond financing support tool has supported the issuance of 28.4 billion yuan of bonds.
The implementation of these favorable policies and financial measures further highlights the commitment of the Chinese government to support and nurture the private economy. It is expected that these efforts will continue to propel the growth of private enterprises and contribute to the overall development and prosperity of the country.