News Analysis: China's new measures to facilitate financing, investment

The Chinese government has unveiled several new measures to find ways to facilitate financing and investment, amid mounting downward pressure for the economy.

China's State Council, the cabinet, announced Tuesday that China will set up a 60-billion-yuan fund (9.4 billion U.S. dollars) to support the development of small and medium-sized enterprises (SMEs).

The fund aims to alleviate financing difficulties for SMEs and promote widespread entrepreneurship and innovation to create new growth momentum, said a statement released after an executive cabinet meeting.

Chinese SMEs provide more than 80 percent of urban jobs, but usually find difficulty getting loans or pay higher interest rates than state-owned firms.

Different from similar national funds entirely appropriated from central finance, the SME development fund will come from both the central government and other sources, including private firms, state-owned enterprises, financial institutions and local governments.

The central government will only provide 15 billion yuan for the fund.

Bai Jingming, vice director of the Research Institute for Fiscal Science under the Ministry of Finance, said the new model allows the collaboration of public and private capital and is a new exploration in reforming the country's financing mechanism.

"The new fund can allow fiscal funds to have greater leverage than before," Bai said.

The cabinet said the fund will prioritize supporting the initial stages of promising SMEs. To attract more social capital, the central government will allow other investors to enjoy the preference in getting earnings, and surrender a certain part of its own due earning.

Bai forecast a positive long-term effect, as SMEs supported by the fund can in turn create more profit and jobs after they prosper.

Amid mounting pressure for the country's economic growth, the cabinet also decided to lower the minimum capital requirement for some fixed-asset investment projects.

China's factory activity continued to lose steam in August, as the manufacturing purchasing managers' index came in at 49.7, falling under the boom-bust line of 50 for the third time this year and the lowest since August 2012.

Exports dropped 0.9 percent from a year earlier in the first seven months. Fixed-asset investment grew 11.2 percent in the same period, extending a slowing trend seen since early 2014.

The cabinet decided to reduce the minimum capital requirement for investment in harbors and airports from 30 percent to 25 percent, from 25 percent to 20 percent for railways, highways and subways, and from 30 percent to 20 percent for projects involving deep processing of corn.

For industries with overcapacity, China will maintain relatively high minimum capital ratio, between 30 and 40 percent, in a bid to push forward the country's restructuring efforts, according to the cabinet.

The move will help raise effective investment and bolster the country's growth, said Wang Jingwen, analyst with a research center under China Minsheng Bank.

As the massive stimulus package rolled out in 2009 fueled overcapacity and property bubbles, the country should put the investment focus on projects that are closely related to people's livelihood to realize healthy investment growth, Wang said. Endi