Apr 09, 2020 08:55 PM

Finance Ministry to Review Low-Cost Epidemic Loan Recipients

As of March 30, 5,881 enterprises in China had obtained a combined 228.9 billion yuan of  low-cost loans, according to central bank data. Photo: People.vcg
As of March 30, 5,881 enterprises in China had obtained a combined 228.9 billion yuan of low-cost loans, according to central bank data. Photo: People.vcg

China’s finance ministry said it would review the list of enterprises that have obtained low-interest loans meant for companies actively engaged in the battle against the coronavirus, in a bid to clamp down on abuse of the cheap funds.

The Ministry of Finance has ordered local finance authorities to review companies in their jurisdictions that have received the loans, according to a Wednesday statement (link in Chinese). The move follows a February initiative by China’s central bank to offer 300 billion yuan ($42.5 billion) of funding to banks for cheap loans to companies that make, transport or sell medical supplies and daily necessities needed in the outbreak.

As of March 30, 5,881 enterprises had obtained a combined 228.9 billion yuan of the low-cost loans, whose weighted average annual interest rate was 2.51%, according to central bank data (link in Chinese). The enterprises’ average financing cost came in at 1.26% after securing fiscal subsidies from finance authorities, well below China’s benchmark one-year loan prime rate of 4.05%.

The finance ministry said local authorities should pay special attention to companies that received such loans over 500 million yuan, and those who were granted these loans from multiple financial institutions. It also asked them to take notice of firms that have attracted a high degree of public attention or received loans after March 15, when the domestic epidemic started to stabilize.

Attempts to take advantage of the policy by deep-pocked companies have sparked concerns that less of the money will reach businesses that actually need it. On Feb. 6, Shenzhen-listed Henan Shuanghui Investment & Development Co. Ltd. borrowed 300 million yuan from Zhongyuan Bank Co. Ltd. for the production and sale of meat products. The loan upset people because Shuanghui Investment was not short on cash and even used large sums of spare funds to purchase investment products from the bank.

 Read more
In Depth: Concerns of Abuse Emerge in China’s Cut-Rate Loan Program for Struggling Firms

Amid growing concerns over abuse of the low-cost loans, Caixin learned in late February that Chinese authorities had booted 48, mostly state-owned, enterprises off an official list of companies eligible for the loans. Some of them had tried to get loans by pretending to produce goods such as disinfectants.

In the latest move to tighten supervision over the loans, the finance ministry instructed authorities to review whether companies that obtained them used the funds for production of emergency supplies and epidemic control-related business operations, and whether their use of the loans met other regulatory requirements.

The ministry instructed local authorities to look out for any misappropriation of the funds, such as using the money to repay debts unrelated to epidemic control or conduct financial investment. Authorities will also seek to identify any firms that received funds, but let the money sit idle, as well as those that deliberately drove up prices of goods. Companies found to have violated regulations are required to return fiscal subsidies or even loans.

Contact reporter Tang Ziyi ( and editor Gavin Cross (

Caixin Global has launched Caixin CEIC Mobile, the mobile-only version of its world-class macroeconomic data platform.

If you’re using the Caixin app, please click here. If you haven’t downloaded the app, please click here.

You've accessed an article available only to subscribers
Share this article
Open WeChat and scan the QR code