China to Inject 54 Trillion Won Amid Signs of Economic Slowdown

Prime Minister Li Keqiang Orders Small Credit Loans for SMEs and Small Merchants
Student Loan Limit Increased to 4000 Yuan... Additional Policies on Reserve Requirement Ratio Expected

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The Chinese government has decided to inject funds again to stimulate the slowing economy. As abnormal signs were detected in key indicators that gauge the economic situation, such as the manufacturing and non-manufacturing Purchasing Managers' Index (PMI), it appears that emergency fiscal and financial policy measures have been taken out.

[Image source=Yonhap News]

According to Chinese media including the state-run Xinhua News Agency on the 2nd, Chinese Premier Li Keqiang convened a State Council executive meeting the day before and instructed to prepare policy funds to support small and medium-sized enterprises (SMEs) and small business owners.

Premier Li stated that SMEs and small business owners are facing difficulties due to strengthened COVID-19 prevention measures following a resurgence, rising international raw material prices, and flood damage, and ordered the preparation and support of new microloan funds amounting to 300 billion yuan (approximately 54 trillion KRW) targeting them.

He also issued instructions to prepare detailed plans utilizing the National Financial Guarantee Fund for SMEs and small business owners lacking credit and collateral. Along with this, Premier Li emphasized, "Please standardize the bill discount rate to alleviate the financial pressure on SMEs." He also stated that the economic cycle should be closely monitored and that the issuance of special local government bonds should be actively considered if necessary.

The State Council meeting also introduced measures to support student loans for university and graduate students. Premier Li demanded an increase in the student loan limits by 4,000 yuan each for university and graduate students to strengthen support so that students can focus on their studies without economic difficulties.

According to this measure, university student loans will increase from 8,000 yuan (approximately 144,000 KRW) annually to 12,000 yuan, and graduate student loans will increase from 12,000 yuan annually to 16,000 yuan. The interest on student loans will be fully subsidized, and the government will partially support the banking sector's burden arising from the interest subsidy on student loans.

This measure is interpreted as a passive quantitative easing policy (targeted support policy) by the Chinese government targeting SMEs, small business owners, and university/graduate students. However, the dominant analysis suggests that large-scale fiscal and financial policies, such as additional cuts to the reserve requirement ratio, were implied depending on the situation.

This content was produced with the assistance of AI translation services.