China unveils new measures unveiled to support foreign companies

The Chinese government is stepping up efforts to help foreign organisations continue to operate as normal as the country suffers fresh outbreaks of Covid-19, including helping to facilitate the cross-border travel of foreign firms’ staff and their family members.

According to an official notification, more efforts will be made to encourage foreign entities to increase their investment in China’s high-tech industry and high-end manufacturing, support them to set up research and development centres in China and participate in national science and technology projects.

In practical terms, the government will provide help in labour, energy, logistics and other factors. More measures will be taken to stabilize the export of industrial products and boost the resilience of industrial and supply chains, the notification added.

Additionally, China’s central bankers are using monetary policy to provide support to the wider economy, to help businesses withstand the challenges from the resurgence of Covid-19.

By doing so, the country has cut financing costs for companies, with social financing and yuan-denominated loans sustaining an expansion, said Yi Gang, governor of the People’s Bank of China (PBOC), addressing the Annual Conference of Financial Street Forum 2022 in Beijing.

Yi said the support has kick-started an economic recovery, with official data showing that China’s GDP increased by 3.9% year on year in the third quarter of 2022, up from 0.4% in the second quarter.

“The current economic operation indicates that we have handled our macroeconomic policy appropriately,” Yi said. He added that, as of late September, the amount of loans to China’s small and micro enterprises totalled 23 trillion yuan ($3.20 trillion). These loans were made to nearly 54 million businesses, four times more than in 2017.

The country’s banks are also supporting large infrastructure projects, with three commercial banks signing deals with companies involved in the transport integration of the Beijing-Tianjin-Hebei region. The banks’ loan, worth 50 billion yuan, will finance an array of transport projects including bullet train rails, inter-city road links and airport express services.

In the property sector, Yi said that the central bank “has made multi-pronged efforts to bolster its development, and it encourages local governments’ region-specific policies, such as lowering mortgage rates and advance payments for homebuyers”.

 

A greener future

Data from the PBOC showed that China boasts the world’s second-largest market of green bonds, which stood at 1.2 trillion yuan as of the end of June. Previously, the Chinese government announced that the country will see peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060.

Yi said that the PBOC had introduced a carbon-reduction lending programme, which channels loans to companies dedicated to the promotion of renewable energy, energy conservation and carbon emission reduction.

He added that financial institutions are also required to calculate how much greenhouse gas these loans help reduce over time.

Hugues de la Marnierre, Group Country Head for Societe Generale in China, one of the participating financial institutions, said: “It is a good sign to see that the PBOC is integrating climate change into monetary policies.”

He said the programme enables Societe Generale to support more carbon reduction projects, adding that he would welcome expansion to other areas, such as biodiversity preservation and energy transition.

By the end of September, the programme had generated over 400 billion yuan of loans for carbon reduction, helping reduce emissions totalling more than 80 million tonnes, the central bank’s data showed.

Li Yong, a chief analyst with Soochow Securities, said: “Thanks to regulatory backing, as well as its ever-improving transaction mechanism and market structure, China’s green bond market is likely to achieve a mutually-beneficial relationship between the supply and demand sides.

Li also called for more emphasis to be placed on assessing the quality of green bonds, “so that market participants and capital are able to flow to the greenest parts of the economy”.