China to Offer Private Firms Bigger Helping Hand

01 Dec 2023

What’s new: China released 25 measures on Monday to encourage the financial industry to support the confidence-challenged private sector, as the country’s economic recovery remains patchy.

The measures, issued by a business group and seven government agencies including the central bank and the National Development and Reform Commission (NDRC), called on banks to boost their share of loans to private companies and increase their tolerance for those that become nonperforming.

Banks should set annual goals for services for private companies, and increase the weight of these services in internal performance evaluations, the measures said.

The measures also aim to support the private sector through equity and bond financing, including via high-yield bonds.

The measures encouraged institutional investors such as commercial banks, insurers, pension funds and mutual funds to invest in bonds issued by private companies. They also promised support for listings, mergers and restructuring of private companies, and for eligible ones to list overseas.

The background: In the past few months, China has rolled out a number of policies to prop up the private sector, whose confidence sagged amid a patchy economic recovery from three years of fighting the pandemic.

In the first 10 months of this year, fixed-asset investment by private companies fell by 0.5% year-on-year, official data show, compared with a 6.7% rise by state-owned enterprises.

In July, the ruling Communist Party’s Central Committee and the State Council vowed to strengthen the private sector with the release of 31 measures aimed at creating a better business environment and boosting support for private companies.

In early September, the NDRC announced it was creating a new agency dedicated to helping the private sector develop.