In east China’s Anhui Province, a mechanical manufacturing company recently found relief as it approached its loan maturity date. By opting for a deferred principal repayment, the company eased short-term liquidity pressures, allowing it to focus on operations rather than immediate repayment concerns.
“The loan renewal terms, including the interest rate and repayment structure, are relatively flexible,” said Zhang Jinzhi, the company’s representative. “When our loan was about to expire, we applied for an extension with deferred principal repayment, which alleviated our liquidity pressures.”
This company’s experience reflects a broader national strategy to support small and medium-sized enterprises (SMEs) in China. The government has rolled out various initiatives this year to ease the financial burden on businesses, with one of the most widely supported being the principal-deferral loan renewal. Initially introduced for micro-enterprises, this policy was later expanded to include small and medium-sized businesses, helping them maintain operations during challenging periods.
Beyond loan renewals, the government has introduced other financial support measures, including a 100 billion yuan (about $13.8 million) re-loan scheme aimed at start-ups and tech-focused SMEs. Financial institutions have been encouraged to reduce service fees for smaller businesses while offering 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.
Hu Dongchen, co-founder and CFO of Syi Tsing Energy Tech, a start-up focused on software and hardware solutions for energy storage networks, emphasized the potential benefits of these policies for their business.
“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,” Hu told CGTN. His company, which is exploring green energy initiatives, values stability and consistency in policies.
These financial initiatives not only provide immediate relief but also fuel innovation among SMEs. With reduced financial pressures, businesses can invest more in research and development, leading to advancements in technology and increased competitiveness in the global market.
China’s commitment to supporting SMEs underscores the vital role these enterprises play in the nation’s economic growth and innovation landscape. As policies continue to evolve, SMEs are poised to benefit from enhanced access to finance and a more supportive business environment.
Reference(s):
China's initiatives for SMEs boost access to finance, fuel innovation
cgtn.com
