China unveils loan incentives to boost investment, consumption

[SHANGHAI] China has announced a slew of incentives to spur investment and consumption, including a 500 billion yuan (S$92.1 billion) loan guarantee facility to encourage private companies to borrow for expansion.

The loan guarantee programme will last for two years, aiming to help qualified private companies pay for spending such as equipment and raw material purchases and technology upgrades, the Ministry of Finance (MOF) said on Tuesday (Jan 20).

An annual interest subsidy of 1.5 percentage points will be available for two years, on loans taken by small and medium-sized enterprises for purposes related to fixed assets, or for participation in projects covered by the policy bank financing tools.

Each borrower can get the subsidies on loans of up to 50 million yuan, noted a separate statement. 

The announcements came a day after the official data showed that the Chinese economy again expanded in a two-speed pattern last year. While strong exports propped up the industrial production in the country, helping its growth reach the official goal of around 5 per cent, consumption remained sluggish and investment posted an unprecedented slump.

The top leaders have made boosting domestic demand their top economic priority in 2026.

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Until now, however, analysts were broadly expecting the authorities to take only a measured approach to stimulus this year, given the resilience of exports, debt constraints and concerns over excess capacity in some industries. 

The MOF separately announced that it is extending a policy of providing loan discounts for consumers till the end of this year. 

Additionally, similar support for companies to upgrade their equipment will be expanded, to include borrowing related to technological innovation. It is also raising the ceiling of interest subsidies for services companies. BLOOMBERG