China eyes reserve cuts, other policy measures to aid small firms

BEIJING (Reuters) – China will use targeted cuts in banks’ reserve requirement ratios (RRR) and other policy tools to boost credit support for small firms and keep economic growth steady, state radio on Wednesday quoted a cabinet meeting as saying.

Fears of a full-blown trade war with Washington have magnified concerns about the outlook for the world’s second-largest economy, following weaker-than-expected growth data for May.

“We will use targeted RRR cuts and other monetary policy tools to enhance the ability to provide credit for small and micro firms,” state radio quoted the cabinet as saying.

The cabinet pledged measures, such as raising rediscount quotas and cutting relending rates, to channel more loans to small firms and reduce their funding costs, it added.

From September 1 until the end of 2020, interest income from credit up to 5 million yuan ($772,546.78) for eligible small firms and households will be exempt from value-added tax, it said.

Loans for small firms with a credit line of 5 million yuan or less will be included in collateral for the central bank’s medium-term lending facility (MLF), it said.

China will stick to its prudent and neutral monetary policy to keep liquidity stable, so as to keep economic growth in a reasonable range, it added.

China will strengthen policy coordination to boost market confidence, it said, following a stock market slide on Tuesday.

In a working paper on Tuesday, the central bank said China should cut the reserve requirement to help ease burdens on banks, fanning expectations of an imminent policy move as its governor urged investors to stay calm.

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