China to further cut financing costs for SMEs while preventing risks

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06:45

China will further cut financing costs for small and medium-sized enterprises (SMEs) by an additional 1 percentage point this year, making sure the financial system will better serve the real economy, said Chinese Premier Li Keqiang at a press conference after the conclusion of the annual session of China's national legislature Friday.

Serving the real economy is the duty of the financial sector. However, the problems of expensive financing for private companies and SMEs do exist, according to Li.

"It's very important to help SMEs maintain their vitality," Li stressed.

"When SMEs are vibrant, our economy will bloom as well, and there will be a stable employment system," Li said.

Last year China's Central Bank cut the reserve requirement ratio (RRR) four times to reduce costs for financial institutions to let money flow to private companies and SMEs. This year the government will take a multi-pronged approach to further reduce the financing cost for SMEs.

Li added that the government needs to encourage financial institutions to enhance internal management systems to provide more services to private companies and SMEs.

As China takes its own initiative to further open up, China will adhere to the principle of neutrality and treat domestic and foreign companies as equals, Li said.

While supporting SMEs through fiscal measures, China will keep in mind to forestall and prevent financial risks.

No new loans will be made to zombie companies which are no longer solvent. Illegal and non-compliant activities will be halted, according to Li.