State Council: Support Small And Micro Enterprises Financing According To Market Principles

October 12th, premier of the State Council Wen Jiabao Today, we chaired a State Council executive meeting to study and identify financial, fiscal and tax policies and measures to support the development of small and micro enterprises. Finance Support should be carried out in accordance with market principles and administrative intervention should be reduced.

The conference study identified a series of financial and supporting policies and measures to support the development of small and micro enterprises. Besides cleaning up the unreasonable fees for financial services and broadening the financing channels for small and micro enterprises, it also proposed to promote the healthy development of private lending on the basis of standardized management and risk prevention.

The specific contents include: effectively curb the tendency of private lending to usury, and crack down on illegal fund-raising, pyramid selling and other illegal activities in accordance with the law. We must strictly supervise and prohibit financial practitioners from participating in private lending. Financial support for small and micro enterprises should be carried out in accordance with market principles, reducing administrative intervention and preventing credit risks and moral risks.

During the "eleven" long vacation, Wen Jiabao visited Wenzhou and other places in Zhejiang, and proposed that we should vigorously rectify the financial order, take effective measures to curb the tendency of usury, crack down on illegal fund-raising in accordance with the law, and properly handle the problem of guarantee between enterprises and the breakup of enterprise capital chain.

But Wen Jiabao also said that financial support for SMEs should be followed. market The principle is to reduce administrative intervention, reduce market risk and moral hazard. We should strengthen supervision over private lending, guide them to develop in a sunny and standardized way, and play a positive role.

Affected by the loan tightening policy this year, private enterprises are widely distributed in the Wenzhou area, constantly spreading the SME chain breaking, bankruptcy, and the owners' "run" news. Wenzhou is the most popular area of private lending, and more and more companies are involved in it.

Wenzhou GDP accounts for less than 1% of the country's total, but it claims to have more than 40 enterprises (mostly small businesses), which are highly dependent on private lending market financing. According to the official forecast of Wenzhou central sub branch of the people's Bank of China, as of the end of June 2011, the scale of private lending has reached 20% of the total bank credit, or about 110 billion yuan, which is larger than that of 80 billion yuan a year ago.

But a report by UBS believes that the scale of private lending accounts for only 20% of the balance of bank loans in Wenzhou, which is likely to be underestimated. Because the central bank's previous research shows that in areas where private enterprises are mainly private lending and active, private lending in a normal year can account for 1/3 of the total corporate loans. When the bank loans tighten, the ratio can rise to 50% or higher. The real scale of China's private lending market should be at least 2 trillion, or even 10% - 4 trillion of GDP.

UBS also believes that private lending can affect the banking sector and the real economy as a whole. This impact includes the direct exposure of the banking sector to private lending, the impact of an enterprise's failure on creditors and suppliers, and the fear and distrust of creditors (formal or informal) to the debtors may cause them to freeze new credit funds or even withdraw capital. The squeeze of liquidity may trigger widespread bankruptcy in a sound enterprise.