Support for real economy

The People's Bank of China and the Ministry of Industry and Information Technology, together with the country's banking, securities and insurance regulators, jointly issued a guideline recently aimed at providing greater financial support to the real economy.

The guideline seeks to forge a diversified system of financial organizations and financial products to support the Made in China 2025 strategy. In particular, financial support will be granted to innovative, transforming, high-tech enterprises, especially aerospace, semiconductor chips, and complete equipment manufacturing enterprises, while restrictions will be imposed on financial flows to sectors characterized by outdated production and overcapacity.

According to the guideline, large, well-performing manufacturing enterprises are now allowed to set up platforms to offer financing and equipment leasing to upstream enterprises in their respective industrial chains, buyers' credit to downstream enterprises, and finance leasing and consumption credit to the terminal product market.

Manufacturing enterprises that enjoy advantages are also allowed to set up financial leasing companies together with financial institutions to offer pledge financing and other services to research enterprises and agencies within respective industrial chains. All this, compared with even a year ago, marks a larger-than-ever step toward providing financial support to manufacturing and other parts of the real economy.

The 2008 global financial crisis triggered by the financial flows from the real economy to the virtual economy in the United States should offer a profound lesson. Such a trend has also become obvious in China in recent years, especially in 2015 and the first half of 2016. So, the brake slammed on the emerging trend in China by the authorities marks a necessary and timely move.

To build up China's manufacturing and realize the Made in China 2025 strategy, China must put in place strict supervision over the implementation of the measures in the guideline document and resolutely curb financial institutions' motivations for speculative money-making.