Government to continue policy of ‘releasing water to nourish fish’

The Financial Stability and Development Committee under the State Council, China’s Cabinet, recently stressed at a meeting the importance of “releasing water to nourish fish”, meaning the release of liquidity into the market to ease the pressure on enterprises and better stimulate their vitality as market players.

The pandemic has had a huge impact on enterprises especially micro, small and medium-sized enterprises, and the government has adopted a series of unprecedented fiscal and tax policies to ease their difficulties.

For example, large-scale tax and fee cuts have been implemented by the authorities, reducing the burden on market entities by more than 2.6 trillion yuan ($460 billion) in 2020.

Banks increased targeted loans to qualified enterprises and lowered interest rates on them as well as agreeing on delayed repayment of principal and interest on the loans by micro, small and medium-sized enterprises. In 2020, the financial system transferred a total of 1.5 trillion yuan in profits to the real economy.

Many enterprises said that without the timely and decisive implementation of such macro policies, they might not have survived the test of the pandemic.

These policies have not only helped many enterprises get out of difficulties by providing financial support, but also effectively ensured employment and people’s livelihoods, and stabilized the basic fundamentals of the national economy.

We should realize that the foundation of domestic economic recovery is not yet solid and the economic fundamentals still need to be further consolidated. Despite the effects of policy dividends, many enterprises especially micro, small and medium-sized enterprises as well as individual businesses are still facing difficulties.

Therefore, the authorities should not make sudden changes to the current macro policies and relevant departments and financial institutions should not slacken their efforts to help enterprises. Only by revitalizing market entities can we better ensure employment and consolidate the foundation for economic recovery.

More practical institutional arrangements and policies should be made, including improving previous tax and fees cuts and lowering financing costs, and measures should be taken to promote their targeted implementation.

At the same time, stricter measures should be taken to crack down on arbitrary charges and fines targeting enterprises that have seriously weakened the dividends of the government’s bailout policies.