Non-public sector to get shot in arm

PBOC chief pledges expanded pilot program to secure bond issuance

Debt concerns among Chinese policymakers made recent fine-tuning more targeted, focusing on mitigating financing difficulties in the private sector instead of offering broadly strong stimulus, according to analysts.

The financial constraints, which have extended to medium and even large privately owned manufacturing companies from small-sized businesses, made policymakers concerned recently. But a massive stimulus package has been abandoned, even with predictions of economic downturns in the next year, analysts said.

Central bank governor Yi Gang attributed private companies' financing difficulties to the waning risk appetite of financial institutions, as the country's debt-control campaign since mid-2017 has tamed some opaque financing activities.

"As financial institutions are unwilling to bear risks, private companies were hurt first, and their major financing channels - bank lending, bond issuance and equity financing - have all been restrained," Yi said in an interview on Tuesday.

The governor pledged an expanded pilot program to secure private companies' bond issuance and prevent defaults, increasing quotas for the central bank's re-lending and rediscount activities, as well as promoting equity financing, to stabilize the private sector's growth.

To help private companies, local governments are raising bailout funds, preparing for rescuing large private companies when necessary, according to some officials familiar with the matter.

But precautions are needed to prevent debt chain breakage if some local governments and large companies postpone debt repayment to private companies, they said.

Some local governments, coordinating with financial institutions, are considering loan extensions for some private companies, along with the further reduction of administrative fees, said an expert close to the Finance Ministry who declined to be named.

"All the measures look moderate, as the central government is concerned about debt expansion - the origin of financial fragility," said Wen Zongyu, director of the State-owned Research Institute for Fiscal Science under the Finance Ministry.

"The good news is the top leadership has realized what the key issues are and has launched the targeted plans to solve the problems," he said.