China’s central bank introduced new support for small businesses

The People Bank of China has revised the lending policy to ease the tight liquidity condition among small businesses in the country. The new policy allows a commercial bank to reduce the reserve ratio requirement (RRR) if the loan to small businesses reaches a certain amount.

Since 2017, the PBOC said that the RRR for commercial bank could be reduced by 0.5% if the lending to small and micro companies takes up to 1.5% of their annual new loan. If new loans to small companies are more than 10%, banks are eligible for an additional 1% reduction in RRR.

Previously, only loans to companies with less than 5 million-Yuan credit lines are considered as small and micro loans. However, the latest tweak lowers the criteria to less than 10 million-Yuan credit lines.