On May 25th, 2012, the Ministry of Finance (“MOF”) and the Ministry of Industry and Information Technology (“MIIT”) of the People’s Republic of China (“PRC”) jointly issued the Measures on Administration of Funds for Credit Guarantee of Small and Medium-sized Enterprises (hereinafter referred to as the “New Measures”) which shall enter into force as of the date of its promulgation. The Interim Measures on Administration of Funds for Credit Guarantee of Small and Medium-sized Enterprises (hereinafter referred to as the “Interim Measures”) that were issued in 2010 shall be simultaneously annulled.
By comparison with the Interim Measures, the key points of the New Measures are as follows:
1. A New Category of Enterprises
There were only two categories of Small and Medium-sized Enterprises (“SMEs”) in the Interim Measures, one of which is the category of small enterprises and the other is the category of medium sized enterprises. In the New Measures, a new category of “micro enterprises” is included.
2. Scope of Application
Funds for Credit Guarantee of SMES should be exclusively granted to credit guarantee agencies and credit re-guarantee agencies which serve SMEs in order to enhance their professional qualification, further develop their guarantee business and improve the financing environment for SMEs, especially micro enterprises, with preferential treatment to China’s central and western regions.
3. Methods and Limits of Funding
The methods of funding are as follows:
a. Service Subsidy
The limits of financial support under this method of funding vary according to the types of services the agencies provided:
|
Type of Services |
Limit of Financial Support |
| Guarantee services for Medium-sized Enterprises | no more than 1% of the average annual guarantee balance |
| Guarantee services for Small Enterprises | no more than 2% of the average annual guarantee balance |
| Guarantee services for Micro Enterprises | no more than 3% of the average annual guarantee balance |
| Re-guarantee services for Medium-sized Enterprises | no more than 0.5% of the average annual guarantee balance |
| Re-guarantee services for Small and Micro Enterprises | no more than 1% of the average annual guarantee balance |
b. Premium Subsidy
If the rate of credit guarantee fee charged by one agency is lower than 50% of the benchmark lending rate for the same period announced by the People’s Bank of China, without any increase in other standards for fees, the agency can apply for financial support of which the rate should be no more than the difference between the 50% of the above-mentioned lending rate and the actual rate the agency charges.
c. Capital Injection
The agencies, which meet the requirements as set in the New Measures, can apply for financial support in the form of capital injection in particular cases. This form of financial support should be no more than 30% of the increased capital.
d. Others
There are some other ways to support the agencies that provide the guarantee or re-guarantee services to SMEs.
According to the New Measures, the qualified guarantee or re-guarantee agencies can apply for more than one method of funding. However, the total funds for the credit guarantee received by one guarantee agency in one year should not exceed 20 million RMB and such funds received by one re-guarantee agency in one year should not exceed 30 million RMB (except in the form of capital injection).
General Comment:
The New Measures clarified certain issues relevant for the management and utilization of credit guarantee funds for SMEs and provided preferential treatment to micro-enterprises and SMEs in China’s central and western regions. The New Measures also show the Chinese government’s determination to create a better financing environment for SMEs.