More small firms allowed to issue bonds

China will allow more small businesses to issue bonds as part of efforts to support the private sector in a slowing economy, the country's top economic planner said yesterday.

Approval procedures will be simplified to allow more firms to issue collective bonds, the National Development and Reform Commission said in a guideline published on its website yesterday.

All proceeds from such bond sales under 100 million yuan (US$16.29 million) can be used to replenish companies' operational capital, the guideline said.

"The measures are aimed at expanding financing channels for small businesses as part of China's efforts to support economic restructuring and industrial upgrade of financial services," the guideline said.

Venture capitals and other institutional investors in small companies are encouraged to issue bonds for funds. Qualified state-owned entities and local government financing vehicles will also be allowed to issue bonds and re-lend the proceeds to small firms, the statement said.

The statement was issued after the State Council, the country's cabinet, on Wednesday announced tax exemption for small businesses with a monthly revenue of under 20,000 yuan from August 1.

Lu Ting, an economist with Bank of America Merrill Lynch, said China is adopting a series of small but efficient "micro stimulus" policies targeting small players on the supply end.

China's foreign exchange watch dog on Wednesday also announced plans to simplify foreign exchange rules for service firms to boost trade.

China has been stressing the role of small companies in lifting growth and creating jobs amid a slowdown.