In east China’s Anhui Province, a mechanical manufacturing company recently breathed a sigh of relief. As their existing loan neared maturity, they opted for a deferred principal repayment, a move that eased their short-term liquidity pressures and allowed them 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. “For instance, when our loan was about to expire, we applied for an extension with deferred principal repayment, which alleviated our liquidity pressures.”
This 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 the principal-deferral loan renewal being one of the most impactful. Initially introduced for micro-enterprises, this policy was later expanded to include SMEs, 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 are 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 initiatives are part of China’s broader effort to fuel innovation and sustain economic growth by empowering SMEs. By improving access to finance and easing financial pressures, the government aims to foster an environment where businesses can thrive and contribute to the nation’s dynamic economy.
Reference(s):
China's initiatives for SMEs boost access to finance, fuel innovation
cgtn.com
