Less than five days. That's how long it took Molarray to receive the first part of the loan after it filed the loan application.

Molarray is an R&D company specializing in life sciences and genetic diagnosis based in the Suzhou Industrial Park, in eastern China's Jiangsu Province. Amid the fight against the COVID-19 pandemic, Molarray's products are used on the frontline to help detect and identify the virus. However, while the employees worked overtime to increase production, the company lacked working capital. The situation changed on February 5, when a loan of 5 million yuan ($718,000) from the Suzhou branch of China Everbright Bank came to its aid.

The Suzhou Industrial Park brings together nearly 1,000 financial institutions. In order to respond to the new difficulties faced by businesses, especially small and medium-sized enterprises (SMEs), the Suzhou Municipal Government immediately put in place concrete measures.

In fact, across the country, the People's Bank of China (PBC), the nation's central bank, the China Banking and Insurance Regulatory Commission (CBIRC) and some other regulatory departments have started introducing various financial policies. The objective is to encourage financial institutions everywhere and of all sizes to help SMEs overcome the difficulties caused by the pandemic.

Suzhou leads the way

On February 2, the city of Suzhou took the initiative by promulgating 10 policies aimed at supporting SMEs within its jurisdiction, with a particular focus on financial support.

"It is timely. We are fighting hard on the frontline, and we are now receiving a constant financial flow. It makes us more confident!" said Bei Haofeng, General Manager of Suzhou Wujiang Zhongyuan Color Board Combination Room Factory.

For Bei, the government's supportive policies could not have been more timely. To ensure the stable production and supply of materials, his company first had to close a funding gap. Thanks to those policies, the Suzhou branch of the China Development Bank allocated 2 billion yuan ($286 million) in emergency funding to local commercial banks. The Suzhou Rural and Commercial Bank then contacted Bei and agreed to provide a loan of 10 million yuan ($1.43 million) for his company.

Four of the 10 measures put in place by the municipal government are linked to financing, and are aimed specifically at SMEs. "We must not only offer adequate financial support, but also cut costs and provide excellent services," said Song Jifeng, Deputy Director at the Suzhou Municipal Office of Financial Supervision.

Due to the delay in resuming work and production as a result of the outbreak of the COVID-19 pandemic, some experts have expressed concerns about the economy and the SMEs in particular. In line with policies enacted by China's Central Government, the 10 measures rolled out in Suzhou have provided comprehensive support to SMEs, setting an example for other regions.

From top to bottom, full support

China has a large number of SMEs operating in a wide range of industries. They contribute about 60 percent of the country's GDP, 50 percent of gross tax revenue, 70 percent of nationwide technological innovation and 80 percent of total employment, according to some statistical data.

However, compared to larger companies, SMEs are more vulnerable to risks. Specifically, the COVID-19 pandemic has led to reduced orders, production delays, higher costs and financial constraints. Lack of capital and disruptions in supply chains have brought double pressure. Some companies are looking to return to work as soon as possible to reduce their losses, but they are also worried about the risks of the pandemic spreading among their workforce.

In recent days, all levels of government in China have acted fast to formulate policies to help businesses survive the crisis. Central financial institutions have played a leading role in this effort, formulating macroeconomic policies.

On February 7, the PBC allocated 300 billion yuan ($42.8 billion) to a bank refinancing program that offers low-cost loans. Hence, national banks as well as local commercial banks in 10 provinces and cities in China, including the epidemic epicenter of Hubei Province, will receive funds, so that they can provide targeted loans to companies engaged in producing masks, protective suits, disinfectants or in transportation and logistics services, all frontline businesses in the fight against the epidemic.

"These companies are on the list, which means they are entitled to these low-cost loans," said Liu Guoqiang, Deputy Governor of the PBC, at a press conference. As of February 25, a total of 1,008 such businesses had received loans at an effective rate of 1.28 percent, below the cap rate of 1.6 percent stipulated by the State Council.

As a result of this new policy, the Fengtai branch of Communications Bank of China in Beijing granted a loan of 51.95 million yuan ($7.44 million) within just two days. The loan was provided to a company producing protective suits for health workers to resume production. The first batch of 500,000 suits was thus completed in time. On February 25, an executive meeting of the State Council decided that financial institutions across the country will be encouraged to temporarily delay loan repayments and increase loans at concessional rates to SMEs.

"A total of 500 billion yuan ($71 billion) has been added to support eligible businesses in an inclusive and market-oriented way, by refinancing and rediscounting their loans," said Liu.

For its part, the CBIRC is helping financial institutions make full use of special low-cost refinancing measures to offer loans at preferential interest rates. As of February 26, such loans to businesses had totaled more than 953 billion yuan ($135.8 billion).

It should be noted that banks are still required to comply with all of their regulatory risk control standards and requirements when providing financial services. "For example, we should not help companies that were not operating normally before the epidemic. We are asking the banks to distinguish between companies struggling as a result of the pandemic and those which were already doing badly," said Xiao Yuanqi, Chief Risk Officer at the CBIRC.

The practical policies recently introduced have played an important role in alleviating the difficulties encountered by Chinese SMEs. Statistics show that more than 30 percent of SMEs across the country had already resumed their operations by the end of February. "Our plan is good, but we need to monitor the situation closely. Next, we will improve our policies based on actual conditions," said Liu.

Comments to glj@chinafrica.cn