You are here: Home » International » News » Economy
Business Standard

China may free up more cash for banking system to support small businesses

Analysts have predicted Beijing will have to lend more support to boost growth next year

AFP | PTI  |  Beijing 

Li Keqiang
Li Keqiang, Chinese Premier

Chinese Premier Li Keqiang signalled plans to free up more cash for the country's banking system in a bid to boost lending to small businesses as leaders look to kickstart the world's number two

Li flagged a fresh cut to the amount of cash lenders must keep in reserve, according to state news agency Xinhua, in the latest move to ramp up stuttering growth. The comments from Li came as he visited a bank in Chengdu a day before Tuesday's trilateral summit with the leaders of South Korea and Japan in the southwestern city.

Li said he was "very concerned about the financing of small and micro businesses" and the government will "increase support for small and medium-sized banks" that directly serve these businesses, Xinhua reported.

The government "will further study measures" such as reducing the reserve requirement ratio and ways to reduce financing costs and interest rates "to significantly ease the financing difficulty and high cost".

It has been a tough year for China's economy, which is expanding at its weakest rate for three decades as it is buffeted by a long-running trade war with the United States as well as a slowdown in global demand for its goods. However, recent data has pointed to a mild improvement in some areas of the economy, while a mini trade deal with the US that will see the rolling back of some tariffs should ease some of the pressure on growth.

Analysts have predicted Beijing will have to lend more support to boost growth next year, with Nomura saying authorities will have to "continue rolling out moderate easing measures".

Beijing already slashed the reserve requirement ratio for banks in October, which freed up about 126 billion to boost lending to mostly small and medium enterprises. Li's remarks came a day after China's cabinet, unveiled measures to support private companies by further opening up major industries to non-state firms and putting in place mechanisms that would give them the same regulatory treatment.

Also on Monday, Beijing said it would cut import tariffs on more than 850 products from January, including frozen pork, cheese, pharmaceuticals and parts for manufacturing smartphones.

Analysts said the move was an indication of China's desire to show it is opening up after this month's mini-deal with the US to reduce some levies and work towards a wider pact.

First Published: Tue, December 24 2019. 12:20 IST
RECOMMENDED FOR YOU