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China to set up state-owned credit guarantee fund

[BEIJING] China plans to set up a state-backed credit guarantee firm to offset some of the risks faced by banks and spur lending where it is needed in a cooling economy, the cabinet said on Friday.

In its second meeting in the week, the State Council said it wants to quicken growth of the credit guarantee sector to ease funding for small companies and agricultural firms.

Credit guarantee firms help borrowers obtain bank loans by guaranteeing a part. As in other countries, small businesses in China have a hard time getting loans from banks as they are deemed to be riskier borrowers than their bigger peers.

The difficulties faced by small companies, which account for three quarters of the jobs in China, have become more pressing as a stuttering Chinese economy subjects the labour market to increased stress.

A state-backed credit guarantee firm will be created and similar companies that are supported by local governments will be prodded into providing basic comprehensive coverage, the cabinet said in a statement on the government website.

Government credit guarantee firms will be offered more tax breaks and no longer be required to be profitable to allow them to back riskier loans taken out by small firms and agricultural businesses, the cabinet said.

Separately, a trading platform will be created by the end of June 2017 to allow for the trading of public assets such as mineral rights and state-owned property rights.

China's cabinet usually meets once a week, on Wednesdays, and no explanation was given for the second meeting this week.