China says guarantee funds should focus on rural development, small firms

SHANGHAI (Reuters) - China's finance ministry said Saturday that government financing guarantee funds should "return to the main business of guarantees" and reduce fees as it seeks to step up support for smaller firms and rural development.

Funds should not "deviate" from guarantees or "blindly expand their business scope, should not provide guarantees to government bond issuance, should not extend credit to government financing platforms, and should not make equity investments in non-financial guarantee institutions", the ministry said in a statement on its website.

Funds that have already engaged in such activities should "actively divest and complete an examination of enterprise assets", the statement said.

Government funds should limit the risks of idle capital operations and shrink the business of guarantees to larger firms, with the goal of having small enterprise and agricultural guarantees make up more than 80 percent of their business, it said.

Funds should put a priority on supporting small businesses and rural bodies with guarantees of 5 million yuan ($738,770) or less, the statement said. They should also reduce fees to "effectively reduce financing costs of small and micro enterprises, and for agriculture, rural areas and farmers", the statement said.

($1 = 6.7680 Chinese yuan)

(Reporting by Andrew Galbraith; Editing by Nick Macfie)