China will improve the transmission mechanism of its monetary and credit policies to ensure full delivery of measures to make financing more accessible and affordable for small and micro businesses, the State Council’s executive meeting chaired by Premier Li Keqiang decided on Aug 22.

The Chinese government attaches great importance to financial services for small and micro businesses. President Xi Jinping stressed that serving the real economy is the central mission of the financial sector and underlined the need for better financial services for small and micro firms. Premier Li Keqiang said that employment and growth prospects hinge on a vibrant small and micro business community. He called for more effective and efficient transmission channels for monetary and credit policies to ensure that all policy incentives targeting small and micro businesses are fully delivered.

“There is now a pressing need for the financial sector to serve the real economy, small and micro businesses in particular, as these businesses play a critical role in creating jobs,” Premier Li said.

Making financing more accessible and affordable for small and micro businesses has been on the agenda of the State Council’s executive meeting many times since the start of this year. In June, re-lending and rediscount quota for small companies and for agriculture and rural areas was increased by 150 billion yuan ($23.11 billion). Application requirements for such lending facilities were eased, new lending formats were introduced, and the scope of qualified collateral widened. In July, re-lending and rediscounts for small companies and for rural areas rose by 19.1 billion yuan.

“There have been some new developments both internally and externally this year, while financing difficulties facing small and micro businesses are acutely felt,” Premier Li said. “It is imperative to smooth the transmission mechanism of financial policies and keep our measures well-calibrated to ensure that liquidity remains reasonably ample.”

The country will stick with prudent monetary policies and refrain from resorting to a deluge of strong stimulus policies, it was stressed at the meeting. The government will work to improve the transmission mechanism of its monetary and credit policies to ensure full delivery of measures aimed at lowering financing costs for small and micro businesses.

More financing support will be given to small and micro businesses, including setting proper time frames and options for loan payment and shortening the time required for credit approval for small and micro businesses, and increasing the share of mid- and long term loans as appropriate.

An incentive mechanism linking performance assessment of financial institution with the amount of loans they issue to small and micro businesses will be established, and a more accommodating approach will be exercised over the loan-to-deposit ratio of financial institutions to further motivate them to better serve small businesses.

Regulatory and evaluation mechanisms will be improved. An indicator on small and micro businesses loans will be added to the evaluation mechanism. Irregularities such as linking loans with deposits and arbitrarily requiring the purchase of financial products will be resolutely prohibited.

All policy incentives introduced must be implemented to see results delivered as soon as possible, and it is important to give equal emphasis to promoting development and staving off risks and help ensure a better economic performance in the remainder of the year, Premier Li stressed.