China's small and medium-sized enterprises (SMEs) are expected to see increased funding this year after the Cabinet-level financial regulatory board called on financial institutions to increase funding support for the said business group.
According to China Daily, finance experts believe the new set of measures to help increase lending support for SMEs will improve business sentiment in the entrepreneurial circle where doubts have been rising due to the slowing economy.
Economists noted that access to financing is still among the top problems that Chinese SMEs are faced with. The SME business groups make up for over 90 percent of the overall entrepreneur counts in the country. However, they receive less support.
To help ease the burdens of small and medium business owners, the State Council's Financial Stability Development Committee on Tuesday came together for the first meeting in 2020 to discuss ways through which the SME market can be assisted further.
After the meeting, the committee released a statement urging financial groups and entities to increase lending capacity for SMEs seeking financial support for their projects or upcoming initiatives.
Before the meeting, the People's Bank of China (PBOC) already started making moves to help lessen the burdens of banks and financial institutions by injecting $115 billion into the Chinese financial sector.
The stimulus is expected to help extend the lending capacity of banks so SMEs can receive further assistance. The move is also believed to be part of Beijing's efforts in bolstering the slowing economy.
Despite optimism for the SME group, some banking experts already expressed concerns about how the financial sector will be impacted by the recent cuts. Senior credit officer of Financial Institutions Group, Sonny Hsu, noted that this would have an effect on net interest margins.
To help curb the potential negative effects on financial institutions, the committee said multiple channels should be established in terms of supporting SMEs in the country. Through this alternative, the ability to provide lending assistance to smaller business will be improved.
Late in December, data from Standard Chartered suggested that China's SME activity saw an improvement as the SMEI index rose 1.1 percent last month, reaching 55.8. The increase marked a hike for the third month in a row.
Demand increased, which then spurred action in terms of production among small and medium-sized firms. Warm temperatures are also believed to have helped spur activity in the said business group.
It is expected that additional lending for Sees in the Chinese business industry will help push activity further as the global economy starts to settle down. While there are risks along the way such as global tensions and trade uncertainties, hopes are high for the segment.
