The Chinese government will roll out a set of fiscal and financial policies, including allocating more local government bond quota in advance as per due procedures and intensifying inclusive financial support to micro, small and medium-sized enterprises. Fiscal and monetary policies will be further leveraged to expand domestic demand, assist businesses reopening, sustain employment, and help all types of businesses to weather this difficult time.

Related plans were made at the State Council’s executive meeting chaired by Premier Li Keqiang on March 31.

The Chinese government puts great emphasis on intensifying counter-cyclical macro-policy adjustment to advance both the epidemic control and economic and social development. General Secretary Xi Jinping said China’s proactive fiscal policy needs to be more vigorous. The deficit-to-GDP ratio could be raised as appropriate, and the scale of special bonds for local governments expanded. Premier Li Keqiang stressed the need for local government bonds to be expeditiously issued and the raised funds utilized to catalyze effective investment.

The meeting underscored the need to scale up special local government bonds and expand effective investment in areas of weakness. On top of this year’s local government bond quota already made available, more will be expeditiously allocated in advance as per due procedures. Such funding will be directed to where the projects are. It will prioritize regions with key projects, low risks and the prospect of quickly boosting effective investment and will be channeled to expediting those projects and livelihood programs.

Localities across the country will be asked to bring forward the issuance of these bonds and endeavor to get the job done before the end of the second quarter.

“It is essential to make well-calibrated arrangements in advance to keep the projects under construction going, and launch some new projects in light of real needs,” Premier Li said.

The meeting adopted stronger measures to offer inclusive financial support to micro, small and medium-sized enterprises. Since the start of this year, the People’s Bank of China has allocated a 300 billion yuan ($43 billion) special re-lending quota, which has so far supported more than 7,000 key enterprises involved in the outbreak response. Another 500 billion yuan in re-lending and re-discount quota is now supporting an increasing number of micro, small and medium-sized firms to get loans at rates below 4.55 percent for their business re-opening.

“Smaller businesses have been hit the hardest by the outbreak. Their restart of operations affects the entire industrial chain and is vitally important for keeping employment stable. The government must promptly roll out support measures that benefit them all,” Premier Li said.

It was decided at the meeting that for small and medium-sized banks, re-lending and re-discount quota will be increased by one trillion yuan. Targeted cuts in the required reserve ratio will be further implemented to encourage these banks to funnel all the newly obtained funding in the form of loans at concessional rates to micro, small and medium-sized enterprises, which are great in number and cover many sectors. The agricultural and foreign trade sectors and sectors heavily affected by the outbreak will get greater loan support.

Financial institutions will be supported in issuing 300 billion yuan in financial bonds to be used as loans exclusively targeting small firms.

The meeting called for an increase of one trillion yuan over the previous year in net financing from corporate credit-backed bonds to expand low-cost financing channels for private and smaller businesses.

It also encouraged developing supply-chain financial products such as raising funds pledged against orders, warehouse receipts and accounts receivable. Smaller firms may thus gain access to another 800 billion yuan in annual financing backed by accounts receivable.

The meeting urged strengthening the loan risk sharing mechanism. It encouraged developing commercial insurance products to enhance credit for micro, small and medium-sized businesses, and lowering government-backed financing guarantee fees to ease the overall financing burden on smaller firms.

“Small and medium banks must meet the eligibility criteria when accessing the re-lending quota. The loan risk sharing mechanism should be strengthened, including targeted cuts to the required reserve ratio for smaller banks,” Premier Li said.

Those at the meeting also decided on steps to boost auto consumption. The subsidy and tax exemption for purchases of new energy vehicles, which were set to expire at the end of this year, will be extended by two years.

Support will be intensified for low-income groups, the meeting decided. Between March and June, the temporary monthly subsidy will be doubled under the mechanism of raising social benefits pro rata with price increases. Those caught in outbreak-induced difficulties will be covered by social protection and work support plans such as the subsistence allowance plan, the support plan for people in extreme poverty and the provisional relief program.

“The essential needs of low-income groups, especially those living in difficulties, must be provided for, and support for livelihood intensified. We have introduced some policies on raising social assistance benefits in relation to price increases, subsistence allowance, and unemployment insurance. We must develop a keen understanding about how the situation may evolve in the second half of the year, and work out as quickly as possible additional support measures as part of our policy reserves. Meanwhile, we must fine-tune the criteria and coverage of related policies in light of changing realities,” Premier Li said.