BEIJING, April 17 (Xinhua) -- China will work to further reduce financing cost of micro and small enterprises (MSEs), with an aim to increase outstanding loans offered by five large state-owned commercial banks to MSEs by more than 30 percent this year comparing with 2018, the State Council executive meeting chaired by Premier Li Keqiang decided on Wednesday.

Premier Li pointed out repeatedly that it is imperative to take a multi-pronged approach to significantly ease the financing woes MSEs face, and set out clear goals for cutting their financing cost.

"Lowering the MSEs' financing cost is a prominent issue in our economy today," Li said, "Our prudent monetary policy should be eased or tightened to the right degree to keep liquidity reasonably sufficient. We need to exercise well-timed regulation, rather than flood the economy with stimulus measures."

It was decided at the meeting that the government must make flexible use of various monetary policy instruments. The scale of re-lending and re-discount will be expanded and more targeted cuts in the required reserve ratio (RRR) for small and medium-sized banks will be made. A policy framework for applying a fairly low RRR for small and medium-sized banks will be established, as was urged at the meeting. Funds that are newly freed up from these measures will be used for lending to private companies and MSEs.

Bond financing support instruments will be promoted to see that the scale of both bond financing by private firms and special bonds issued by financial institutions for MSEs exceed the 2018 level.

Banks need to improve the evaluation and incentive mechanism to strengthen their confidence, readiness and capacity lending to MSEs, the meeting urged. The government will support banks in formulating inclusive finance plans dedicated to MSEs and guide banks toward proper pricing of lending.

All these measures are designed to ensure that the balance of loans extended to MSEs by the five state-owned commercial banks, namely, the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications, will increase by over 30 percent this year, and the overall financing cost for MSEs will be trimmed by another one percentage point over last year.

"We must resolutely bring down the financing cost for MSEs. This is a crucial task in promoting economic development as it helps lift employment and contributes to the healthy and steady growth of private companies," Li said.

Attendants at the meeting decided to use government-backed financing guarantee to lower the financing fees for enterprises. The central government will continue to allocate funds under public finance to incentivize reductions in the guarantee fees of MSE financing. The State Financing Guarantee Fund will support no less than 200 billion yuan (29.81 billion U.S. dollars) of guaranteed loans to at least 100,000 MSEs this year.

The goal of capping the guarantee rate at one percent for MSEs with a guarantee volume of five million yuan or below, and 1.5 percent for those with a volume above five million yuan, must be achieved across the country at an early date.

It was also decided at the meeting that the government should further guide banks in raising the share of credit-based loans and reduce dependence on collateral guarantee. More efforts will be made to overhaul the intermediary fees, including surcharges for collateral registration, asset evaluation and bridge loans, to ease the financing burden on businesses.

Competent departments are required to conduct inter-agency inspections on unjustified and arbitrary charges in corporate financing to ease the burden on enterprises.