(Yicai Global) Jan. 6 -- China's central bank will step up its support to lower small and medium-sized enterprises' borrowing costs this year and further the country's supply-side structural reform.
China will improve the way that lenders assess loan applications and do due diligence to create an environment where banks dare to lend money to SMEs, the People's Bank of China said in a document released yesterday after its 2020 working conference.
The PBOC marked its journey of channeling more money to small and privately owned firms last year by starting to release loan prime rates each month to shake up the way that commercial banks price new loans.
The central bank will deepen the market-oriented interest rate reform, improve the LPR system, and advance banks' issuance of perpetual bonds to replenish capital. The PBOC will also actively develop the bond market and support strengthening connectivity.
The PBOC will use policy tools such as targeted reserve requirement ratio cuts, refinancing and rediscounting, macroprudential assessment, and credit management to support SMEs' business, it said.
The central bank will strive to make the Chinese yuan more influential overseas while advancing the foreign exchange management system reform. To this end, the PBOC will support free trade zones to pilot such programs.
China will maintain a stable and flexible monetary policy this year, said the PBOC. It will continue to let the market play a decisive role in forming the exchange rate while keeping the yuan generally stable at a reasonable level.
The central bank will strengthen counter-cyclical adjustments, maintain reasonably abundant liquidity, as well as promote credit growth and total social financing to match economic development.
The PBOC will continue to manage key financial institutions' risks in line with laws and regulations. It will specifically pay attention to the hazards lurking online. The central bank will also advance the establishment of a long-term solution to rein in property sector risks. It will let deposit insurance institutions to help in risk management and accelerate its Financial Stability and Development Committee's work to set up a related coordination mechanism, it added.
Editor: Emmi Laine