China says it will make targeted cuts in bank reserve requirement ratios (RRR) to boost lending support for small companies that have been hit hard by the coronavirus outbreak.

The targeted cuts in RRRs – the proportion of cash banks must hold in reserves – will be for inclusive financing, or supporting small firms, while there will be additional cuts for joint-stock banks, according to a statement on the Chinese government's website.

Such cuts will help boost lending to small firms and private businesses, and reduce their financing costs to help them resume operations, said the statement issued after a meeting of the State Council chaired by Premier Li Keqiang on Tuesday, to further deploy and optimize work mechanisms to mitigate any setbacks to China's economy and society caused by the coronavirus outbreak.

China's central bank has issued a raft of steps to cushion the blow on the economy from the virus outbreak, cutting the benchmark lending rate and making cheap subsidized loans to encourage bank lending to selected firms.

It is widely expected to cut the RRR again in coming weeks.

China said new measures are to be taken to stabilize foreign trade and overseas investment in the country, as it is restarting the economy which was hit by the novel coronavirus.

The meeting confirmed new measures for stabilizing foreign trade and investment and deployed work to further unblock the capital and industrial chains, and keep promoting resumption of production and work in the country.

It also called for better use of special re-loan and re-discount policies to support epidemic prevention and control, and relieve the developmental difficulties facing enterprises.

The meeting said that China will continue to open up. To stabilize foreign trade and investment, it will give full export rebates to all products in time, except for those that are in the categories of high energy consumption, high pollution and resource-based. 

Additionally, the country will guide financial institutions to increase credit loans for foreign trade and implement extension policies on repayments of capital and interest. 

Other measures included supporting commercial insurance companies in developing short-term export credit insurance and reduce fees, and continuing to shorten the negative list, which limits access of foreign investment in certain industries or areas in China.

Furthermore, the meeting urged the expansion of international cooperation to maintain the international supply chain, for example, by increasing international freight flights. 

While guiding overall economic activities in returning to normalcy, China will keep working on relieving the cash flow pressure of small- and medium-enterprises (SMEs) hit during the epidemic, by encouraging financial institutions to enhance support of loan lending to core enterprises in industrial chains.

Earlier, China granted special re-lending funds of 300 billion yuan (43.16 billion U.S. dollars) to help SMEs, and the central bank increased their re-lending and re-discount quota by 500 billion yuan.

(With input from Reuters)