The government will establish an incentive mechanism linking the performance assessment of financial institutions with the amount of loans they issue to small and micro-sized businesses, according to a State Council executive meeting chaired by Premier Li Keqiang on Aug 22.

The move was one of many measures decided at the meeting to ease financing difficulties for small and micro-sized businesses.

Premier Li said at the meeting that currently it is important to listen and respond to the appeals of market players, and promote the implementation of measures to stabilize employment and revive businesses.

He stressed the need for the financial sector to serve the real economy, including small and micro-sized enterprises in particular, as these businesses play a critical role in creating jobs.

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 encourage financial institutions to offer more loans to small and micro-sized enterprises, and lower their financing costs, Premier Li said.

According to the meeting, more financing support will be given to small and micro-sized enterprises, including setting proper time frames and options for loan tenure and payment and shortening the time required for credit approval for small and micro-sized enterprises.

In addition, the government is also working on exemptions of value-added taxes on loan interest for small and micro-sized enterprises, and an increase of tolerance for the loan-to-deposit ratio indicator.

Development and risk prevention are equally important, Premier Li said, adding that the government will optimize regulatory evaluation, and add an indicator on small and micro-sized enterprise loans.

Linking loans with deposits and binding financial products with loans are prohibited, he said.

While easing difficult financing for small and micro-sized enterprises, the financial sector shall better serve the real economy with solid measures, Premier Li stressed.

“The government will accelerate fee reduction, and make loans more accessible and affordable for small and micro-sized enterprises. Both are positive signals to stabilize market expectations,” the Premier said.