In east China’s Anhui Province, a mechanical manufacturing company recently found relief from financial pressures through a government-supported loan renewal program. As its existing loan neared maturity, the company opted for a deferred principal repayment, allowing it to focus on operations without the immediate burden of repayment.
“The loan renewal terms, including the interest rate and repayment structure, are relatively flexible,” said Zhang Jinzhi, a representative of the company. “When our loan was about to expire, we applied for an extension with deferred principal repayment, which alleviated our liquidity pressures.”
This experience is emblematic of a broader national strategy in China to support small and medium-sized enterprises (SMEs). Recognizing the pivotal role SMEs play in the economy, the government has introduced various initiatives this year to ease their financial burdens. Among the most significant is the principal-deferral loan renewal policy. Initially targeted at micro-enterprises, this policy has been expanded to include small and medium-sized businesses, providing them with crucial support during challenging periods.
In addition to loan renewals, the government has unveiled other financial support measures. A 100 billion yuan (approximately $13.8 million) re-loan scheme has been launched, aimed at start-ups and tech-focused SMEs. Financial institutions have also been encouraged to reduce service fees for smaller businesses and offer more flexible repayment terms. By September 2024, the total loan balance for small and micro-businesses had increased by 2.2 trillion yuan across major commercial banks.
For companies like Syi Tsing Energy Tech, a start-up specializing in software and hardware solutions for energy storage networks, these initiatives offer promising opportunities. “Though it takes time for national policies to be implemented by banks, the option for loan extension with deferred principal repayment directly supports our operations,” said Hu Dongchen, co-founder and CFO of the company. “We value stability and consistency in policies, especially as we explore green energy initiatives.”
These financial support measures are not only easing immediate pressures but are also fueling innovation among SMEs. By providing access to crucial funding and flexible repayment options, China is fostering an environment where small businesses can thrive and contribute to economic growth.
Reference(s):
China's initiatives for SMEs boost access to finance, fuel innovation
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