China’s central bank to boost support for private sector with more financial resources.

China's central bank to boost support for private sector with more financial resources.

China Pledges Support for Private Economy Amid Economic Slowdown

Image Source: Reuters

Beijing, Aug 3 – As China’s economy faces a slowdown, the country’s central bank has promised to bolster the confidence of private firms by directing more financial resources towards them. This renewed commitment comes as part of Beijing’s efforts to support the private economy amid weakening economic momentum.

During a meeting with several private firms from various sectors, including property, aluminum, and agribusiness, the People’s Bank of China (PBOC) Governor, Pan Gongsheng, assured these companies of the bank’s support. He revealed that the PBOC would soon roll out guidelines to support and aid private firms.

Expanding Debt Financing Tools for Private Firms

Responding to the requests from some firms to broaden their bond financing channels, Pan said that the central bank would expand debt financing tools for them. These debt financing tools, also known as “the second arrow,” were launched in 2018 and are supported by PBOC refinancing. This move aims to provide private firms with additional options for raising capital.

Pan emphasized the importance of supporting private firms, stating, “Supporting the development of private firms is the duty of financial departments. It is also an important part of the supply-side structural reform in the financial sector.” The PBOC’s statement also urged financial institutions to actively create a positive atmosphere that supports the growth and development of private firms and increase their willingness to lend.

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Policy Measures to Revive Private Businesses

Last month, China announced a series of policy measures designed to revive and support private businesses. These measures come in response to the challenges faced by the private sector due to COVID-19 restrictions and a regulatory crackdown that affected various industries, including technology and property.

Under these policy measures, the PBOC will support local governments in clearing arrears owed to private firms. The central bank also aims to understand the financial needs of private firms better and respond to their concerns and appeals. Additionally, the PBOC has vowed to meet reasonable financing demands and implement differentiated housing credit policies for private property firms.

Overcoming Challenges in the Property Sector

The property sector in China has been grappling with a severe debt crisis for the past two years, triggered by government efforts to curb escalating debt levels. Many developers have defaulted on payments as they struggle to sell apartments and raise funds. To address this situation, the PBOC has pledged to support private property firms that are still struggling and implement precise housing credit policies.

The meeting attended by various private firms included industry leaders such as Longfor Properties, Midea Real Estate Holding, CIFI’s property firm, Yili Group, China Hongqiao Group, Chint Group, New Hope, and Hongdou. This gathering aimed to revive confidence among private businesses and address their operational difficulties.

Seeking Public Feedback for Private Economy Growth

In an additional effort to support the private economy, the cabinet has invited the public to report any obstacles hindering its growth. This inclusive approach ensures that all stakeholders have the opportunity to contribute to the development of the private sector and promote a vibrant and robust economy.

As the Chinese government takes proactive measures to boost the private economy amidst an economic slowdown, the outlook for private firms appears more promising. With increased financial resources and targeted policies, these firms can regain their footing and contribute to the country’s overall economic growth.

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