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Financial Institutions Incentivised to Back Small and Micro Businesses

Micro and small enterprises are to get easier access to funding following a State Council move to incentivise financial institutions to support such businesses. The initiative was announced in the wake of the State Council’s 27 September meeting and will see any bank or other lending body lending to qualifying enterprises eligible for tax cuts and reductions to their targeted reserve requirement ratios (RRRs).

 Among the other supportive measures announced are the following:

  • For the period 1 December 2017 to 31 December 2019, the VAT exemption for financial institutions with regard to interest income will be extended from solely relating to loans to rural residents to include loans to micro and small enterprises, as well as to privately-owned businesses. At the same time, the upper limit for VAT-exempted loans will be raised from RMB100,000 (US$15,000) to RMB1 million.
  • The current exemption from stamp duty on loans to micro and small enterprises and the exemption from VAT liability for micro and small enterprises with a monthly sales turnover of not more than RMB30,000 will be extended until 2020.
  • The larger state-owned banks will be incentivised to nurture smaller businesses through targeted RRR cuts and suitable re-lending support. Such loans should relate to the primary operational activities of the businesses in question, but could also be extended to a number of other areas, such as farm production or any required startup guarantees. Overall, such credit facilities should not exceed RMB5 million per client, while the size of the loan should be in line with the company’s ability to pay or its existing balance of funds.
  • The development of policy-oriented financing guarantees and re-guarantee institutions will be prioritised, as will the establishment of a national financing guarantee fund.
  • In the case of secured business startup loans, the business loan record requirement relating to interest discounts will be eased, while the procedures for the renewal of pledge registrations and the disposal of non-performing assets will be simplified.  

For further details (in Chinese), please refer to the following link:

Li Keqiang Chairs State Council Executive Meeting to Hear Reports on Reorganisation and Integration of Central Enterprises and Other Tasks

Content provided by Picture: HKTDC Research
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