China unveils measures to improve government financing guaranty

Chinese authorities have unveiled a set of measures to promote and regulate the development of government financing guaranty amid efforts to beef up financing support for business entities.

The regulations, jointly issued by the Ministry of Finance and five other government organs, specified that government-backed financing guaranty institutions should prioritize policy-oriented financing guaranty services, with focuses put on key targets and weak areas.

It stipulated that greater support should be delivered to business entities, especially small and micro businesses and enterprises related to agriculture, rural areas and farmers, which boast strong job creation capacities and labor-intensive characteristic.

Under the regulations, local financial authorities will be allowed to support government-backed financing guarantee institutions via methods such as capital replenishment, risk compensation and performance rewards, provided that no new hidden debts are incurred.

It also urged these government-backed financing guaranty institutions to steadily expand their business to better support enterprises in tiding over difficulties, and stabilizing and increasing employment.

The regulations will be effective from March 1, 2025.

Government financing guaranty helps borrowers get loans from financial institutions by enhancing their credits, sharing risks and acting as an intermediary in the process. It has been regarded as an important instrument for policymakers to channel financial resources to the real economy.