BEIJING -- Chinese officials have approved 500 billion yuan ($71 billion) in fresh financing that will provide cheap loans to smaller enterprises struggling to resume operations amid the new coronavirus outbreak.
This batch of funding comes on top of the 300 billion yuan re-lending quota authorized this month by the People's Bank of China, the central bank.
"If the support quotas are not enough, we will increase them further," Liu Guoqiang, vice governor of the PBOC, said at a news conference Thursday.
The central bank lends low-interest funds to commercial banks, which in turn finance small to midsized businesses. The end borrowers pay an annual rate of 2.5%, much lower than the 4.05% prime rate charged to large state-owned enterprises.
Moreover, half the borrowing costs by small businesses are subsidized by government largesse. For the 300 billion yuan re-lending quota, borrowers pay an average rate of 1.28% in effect.
The 500 billion yuan in fresh liquidity will be comprised of a 400 billion yuan re-lending quota, as well as a 100 billion yuan re-discounting quota.
Conventional loans have mounted in recent weeks. Financing related to the coronavirus has grown to 953.5 billion yuan as of Wednesday, according to the Banking and Insurance Regulatory Commission.
Only 33% of small to midsized businesses have resumed normal operations as of Wednesday, according to the Ministry of Industry and Information Technology. In contrast, between 70% and 90% of larger enterprises have restarted business in many provinces.
On top of securing labor and supplying masks, restoring operations requires negotiating multiple issues with local government officials. That has necessitated a load of complex paperwork.
"We will closely audit unnecessary approval procedures," Zhang Kejian, vice minister at the Ministry of Industry and Information Technology, said.
The coronavirus has deeply undercut sales in the service industry, especially among retailers and eateries. Small businesses occupy a large proportion of those sectors.
Nearly a third -- 30% -- of small to medium-sized enterprises project revenue will drop by at least half this year, according to a survey of about 1,000 respondents conducted jointly by Tsinghua University and Peking University, and released at the start of the month.
A prolonged slump could lead to layoffs. The same survey shows that 85% of the businesses can only survive only one to three months on the funds on hand before wages, rent and other overhead leaves them dry.