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Thursday, September 07, 2000, updated at 10:34(GMT+8)
Business  

New Rules for Small Businesses

Chinese authorities have approved new rules for small enterprises which aim to develop the long-neglected private economy, an official and state media said on September 6.

The guidelines, approved by the cabinet this week, offer more government support to millions of small companies and make it easier for them to raise funds.

Policymakers have been ambivalent towards private firms in the overwhelmingly state-owned economy but attitudes are slowly changing as the government seeks more drivers for growth.

"China wants to take a step forward to promote private investment," said a senior official of the State Economic and Trade Commission, which drafted the rules. "Small enterprises offer important support for re-employment, especially for workers laid off from large state enterprises."

Beijing is trying to reform the ailing state sector and millions of jobs are under threat as firms try to improve efficiency.

The new rules encourage banks to lend more to small companies and allow firms meeting requirements to list stock and issue bonds.

About 85 percent of the small and medium enterprises are "non-state", including private and collective firms. China has 1.28 million registered private companies. But banks have been reluctant to lend to private firms since they do not have state backing in case of defaults.

Under the new guidelines, interest rates for loans to small companies will be allowed to float in an even wider band to compensate for banks' higher risk, the newspaper said. Loans to small companies are already allowed to float up to 30 per cent above or below the base level set by the central bank. For other larger companies, the limit is 10 percent.

A spokesman for the People's Bank of China said the central bank had yet to set fresh band limits under the new guidelines.

Central bank chief Dai Xianglong said in July that China's rigid interest rate regime would be relaxed over the next three years by allowing the market to set most deposit and lending rates.

China plans to set up a second board early next year to list private and high-technology companies.




In This Section
 

Chinese authorities have approved new rules for small enterprises which aim to develop the long-neglected private economy, an official and state media said on September 6. The guidelines, approved by the cabinet this week, offer more government support to millions of small companies and make it easier for them to raise funds.

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