China’s monetary policy improving businesses’ access to finance

The Chinese central bank says its monetary policy is helping organisations meet the economic challenges they are facing including the cost of finance and fluctuating demand both at home and overseas.

Yi Gang, governor of the People’s Bank of China (PBOC), said that by leveraging monetary instruments the country has reduced financing costs in the real economy, with social financing and yuan-denominated loans sustaining an expansion.

His view was backed up by the latest official data, which showed 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, adding that the policy has helped keep both economic fundamentals and prices stable. He said Chinese banks have made full use of inclusive finance to shore up cash-strained businesses.

Yi said that, as of late September, the balance of inclusive loans to China’s small and micro enterprises reached 23 trillion yuan (about $3.21 trillion). These loans covered nearly 54 million businesses, a quadruple increase from the end of 2017.

He added that as well as nurturing small businesses, loan support was also supporting the country’s mega infrastructure projects, pointing to north China where three commercial banks have signed an agreement with companies working on transport integration projects in the Beijing-Tianjin-Hebei region. Here the banks are to issue loans worth 50 billion yuan to support an array of transport projects.

In the property sector, Yi said that the central bank is encouraging local governments’ region-specific policies, including lowering mortgage rates and offering advance payments for homebuyers.

The PBOC has also launched a 200-billion-yuan loan scheme to guarantee housing completion, including the issuance of risk-sharing bonds to private property developers.

The latest official figures also show that profits at China’s industrial firms grew for the third consecutive month in October.

Data from the National Bureau of Statistics (NBS) showed that industrial enterprises with annual revenue of at least 20 million yuan ($2.8 million) saw their total profits increase 2.7% year-on-year in October, following an 11.9% rise in September.

NBS statistician Yu Weining attributed the recovery in industrial profits to the steady rebound in industrial production and aided by a series of macroeconomic government policies.

The figures show that for the January-October period, industrial firms’ profits fell 7.8% year-on-year to 6.12 trillion yuan. Among the 41 major industrial sectors surveyed, 30 saw improvements such as accelerated growth or narrowed profit declines during the first 10 months of 2023.

During the January-October period, energy firms’ profits grew by 40% year-on-year, while profits recorded by mining firms and manufacturing companies shrank by 19.7% and 8.5% in that period.

And the profits of raw materials manufacturing firms surged 22.9% in October amid continued recovery in demand.

Profits generated by consumer goods manufacturing companies increased by 2.2% in October with policies on expanding demand and boosting consumption taking effect gradually. It was the third consecutive month profits had risen in the sector.

During the January-October period, profits at equipment manufacturing enterprises rose by 1.1% on a yearly basis, NBS data showed.

Private sector benefiting from tax relief measures

Latest data from China’s tax authority shows that newly-implemented tax refunds, tax and fee cuts and deferrals exceeded 1.66 trillion yuan ($233.28 billion) in the first 10 months of this year.

It said that taxpayers from the private sector have become a major beneficiary of the country’s tax and fee relief measures, as nearly 1.24 trillion yuan of tax and fee payments were rebated, deducted or deferred for private businesses during the period, the administration said.

• China has appointed Hu Jinglin as Party Secretary of the State Taxation Administration, the tax authority has confirmed.