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Industrial dynamic crucial against economic slowdown

(Xinhua)
Updated: 2008-12-08 07:20

Four years ago, Yanshi city government set up a credit guarantee company with its 10-million-yuan registered capital coming from fiscal input. No bad or non-performing loans had occurred yet.

This month, Yuan will also organize a special meeting where a number of financially-strained local companies with good market prospects will be recommended officially to banks.

In response, Anhui Province's Wuwei County government has planned to spend 30 million yuan setting up credit guarantee companies. As the guarantee premium was capped at one percent of the credit, much lower than the market average, local credit guarantee companies would receive subsidy for the premium spread until June.

Moreover, a risk compensation fund of two million yuan has been launched to offset a certain proportion of the losses that financial institutions may derive from extending loans to smaller enterprises.

To alleviate industrial burden, Wuwei county government also promised to cover two percent of the newly increased interest payment for industrial enterprises who secure loans from designated financial institutions by the end of June.

The whole stimulus package would cost Wuwei County a fiscal input of 60 million yuan, about 5.5 percent of its 2007 fiscal revenue of 1.1 billion yuan. But in some less developed counties where fiscal outlay heavily relies on central government's transfer payment, capital strain has been a long-standing headache.

As the central government's 4-trillion-yuan stimulus package required local government to pay a counterpart fund from local finance, Lian Weiliang, secretary of Henan's Luoyang City Committee of the Communist Party of China, said this might be the time to consider allowing local governments to issue bonds.

Confident about the ongoing battle with the slowdown, Wuwei County magistrate Lian Xuwen said that the first quarter of next year would be a proper time to evaluate the effect of these stimulus and consider a policy adjustment.

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