We start today's show with a look at China's financial policy shift. China's Central Bank issued guidelines on Monday to encourage lending to small- and micro-businesses. It is the central government's latest move to expand financial support for one of the country's most crucial economic drivers. Tracey Chang reports.

China will cut re-lending interest rates for small and micro enterprises by 0.5 percentage point as part of a broader policy package to ease the financial strain on small firms. That's according to a central bank document released on Monday.The re-lending and re-discount quotas for small companies and agricultural sectors, will be increased by a total of 150 billion yuan.

The document also said that financial institutions will be encouraged to issue securities backed by small enterprises. These measures are expected to create credit of more than 100 billion yuan.

DONG XIMIAO, SR. RESEARCHER CHONGYANG INSTITUTE FOR FINANCIAL STUDIES, RENMIN UNIV. "These loans can directly go to small businesses through commercial banks. The policy change will help banks cut their liquidity cost. That will be, in turn, reflected in companies' loan costs. The effect is immediate."

The measures followed the central bank's decision Sunday to cut some banks' reserve requirement ratios on July 5 to support qualified debt-for-equity swap programs and broaden access for small business financing. The State Council outlined a series of policies last week to improve credit availability to small companies. The move reflects concerns that liquidity tightening is weighing on business, especially small firms.

DONG XIMIAO, SR. RESEARCHER CHONGYANG INSTITUTE FOR FINANCIAL STUDIES, RENMIN UNIV. "Five state departments will work together in the rolling-out of the new policies. Only through close collaboration among those departments can the financing issues of small companies be resolved."

Government data shows that small and micro companies contribute to more than 60 percent of China's GDP, 80 percent of jobs and 50 percent of the country's tax revenue last year. The PBOC has cut required reserve ratio twice this year in a bid to boost financing support for small businesses. Analysts say while more credit support should be given to small companies, authorities should also phase out financial support for "zombie companies" so that resources can be better allocated.