The Ministry of Finance ("MOF") has recently issued the Circular on Fully Leveraging the Government-backed Financing Guarantee in Credit Enhancement for the Financing by Small and Micro Firms, Agricultural Businesses, Farmers and Businesses in Rural Areas (the "Circular").
The Circular calls on the government-controlled financing guarantee and re-guarantee agencies to facilitate the credit enhancement for the financing sought by small and micro firms, agricultural businesses, farmers and businesses in rural areas, and endeavor to expand their business scale, improve service efficiency, timely fulfill their obligation in repayment for these borrowers, and cancel after verification the losses incurred from such repayment in accordance with the law; they are also required to coordinate with financial institutions to make sure loans will be issued as quick as possible, and not be withheld, withdrawn or canceled, in a bid to practically mitigate the problem of difficulty in and high costs of financing that haunts small and micro businesses. Meanwhile, equity investment with the national financing guarantee fund will be accelerated, in a bid to complete, within the year 2020, investment in 10 government-backed financing guarantee agencies at the prefecture level that have achieved positive results in supporting small businesses and farmers. Moreover, the Circular clarifies that local government-backed financing guarantee and re-guarantee agencies at all levels shall halve the financing guarantee fees and re-guarantee fees charged from small and micro firms in 2020, in an effort to reduce the overall financing guarantee fee rate below 1% for small and micro firms. In addition, the business in support of small firms and farmers will account for a larger proportion, to ensure the amount of guaranteed financing and the number of new small and micro firms, agricultural businesses, farmers and businesses in rural areas that receive the financing will each represent no less than 80% in 2020.