China to slash bank reserves to help small businesses

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China to slash bank reserves to help small businesses

In the wake of a basket of malevolent economic data signaling a steep slowdown since the beginning of the year, the Chinese government had again been exploring options of introducing further economic stimulus. Previously, in first quarter of 2019, China had introduced low-cost long-term loans for small and medium-sized business to keep its domestic business up and running.

Around this time, China had been planning to amp up its policy of specific reserve cuts to encourage financial institutes such as banks and other lenders to finance small and medium-sized enterprises, which would eventually play a critical role in its economic growth amid a contracted demand of its factory goods following a nine-month-long trade war with United States, China’s largest consumer in the world.

At a document posted on Chinese Central Government’s website on Sunday, the 7th of April 2019, Beijing had urged larger lenders to keep injecting money into the struggling companies, in particular small private companies and businesses, which usually played a pivotal role for Chinese economy, as privately-owned smaller companies accounted for over half of the country’s economic growth and jobs.

Besides, the document on Central government’s website had also added that the State Council would soon be accelerating the initial public offerings small- and medium-sized companies. Apart from that, the document had also revealed that financing for the small and medium sized companies would be expanded further through an easier access to public capital markets such as stock exchanges and investment funds, alongside preferential monetary policies.