People’s Bank of China introduces new measures to stimulate small businesses
China’s economy is in recession due to the outbreak of the pandemic and stringent quarantine measures. Small businesses have been particularly affected, and their operations have been virtually paralyzed. To support entrepreneurs and stimulate the lending segment, the People’s Bank of China decided to repurchase loans from regional financial institutions. In addition, the country’s chief regulator plans to use interest rate swaps to help banks increase lending to small and medium-sized businesses.
The PBOC has already allocated about $53 billion to buy loans from various financial institutions. According to experts, this step should increase the number of loans issued by about 1 trillion yuan.
The regulator also set a condition for the banks, which plan to participate in the program – they should provide loans to small businesses at reduced rates. Besides, financial institutions will have to buy loans from the PBOC in a year, and the PBOC, in its turn, does not take credit risks.
Companies that wish to borrow money undertake not to reduce their staff.
Earlier, the People’s Bank sent about 40 billion yuan, which will be used to support regional financial institutions.
In May, it became known that China has not set a target for this year’s GDP growth rate. The reason was the coronavirus pandemic and strict quarantine, which was introduced in the country for several months. According to the government, they plan to keep the unemployment rate at 6%. Last year, the rate was 5.5%. The target has not been fixed for the first time since 1994.
Last year, the Chinese economy grew by more than 6%. This has been almost the lowest level in 30 years. The target was 6-6.5%. The decision not to set it this year was due to unexpected negative factors faced by the state. According to the Chinese authorities, the lack of a fixed indicator will make it possible to focus all efforts on improving security and stability in the economy.
Having dropped the target of achieving a certain value of GDP, the Government will not actively increase the pace at the expense of other segments. However, the Chinese economy has a large impact on global processes, and its slowdown could have a negative impact on the world market.
In the first quarter, the country’s GDP fell by 6.8%, the highest drop in 40 years. In order to stabilize the situation, the authorities introduced a number of measures that will allow achieving positive dynamics by the end of the year. According to the forecast, the budget deficit in 2020 will amount to 3.6%, while last year it was at 2.8%.