A worker assembles an auto engine at a SAIC-GM-Wuling Automotive Co Ltd plant in Qingdao, Shandong province. The government will increase financial support for the development of the manufacturing sector. [Photo/China Daily]

Govt says lenders and investors can help move sector up the value chain

The move is expected to help manufacturers with technological advantages and good market prospects to secure long-term, lower-cost funding through various channels.

More financial support will be provided to technological and manufacturing upgrades, said a guideline released by the People's Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Insurance Regulatory Commission and the China Securities Regulatory Commission.

Banks and institutional investors will play various roles, and agencies will be established to offer more professional services and support to the industry, the guideline said.

Banks will be required to appropriately conduct pilot programs to securitize nonperforming loans related to manufacturers in a bid to proactively reduce lending risk. The sector has been facing overcapacity burdens, affecting companies' ability to pay off their debts.

The guideline encourages insurers to expand their investments in the sector to ease their access to stable and long-term funding.

China will also encourage manufacturers to accelerate progress in listing on domestic or overseas stock markets, or raise funds through bond issuance, the guideline said.

Collaboration procedures between manufacturers and providers of financial services will be streamlined, and information disclosure will be transparent and prompt, according to the guideline.

The country introduced its Made in China 2025 initiative in 2015, targeting a shift to high value-added manufacturing in place of low-end production. The initiative's objectives focus on developing internal capacity and competencies in 10 key sectors, including new energy vehicles, automation, robotics and power equipment.

"These moves in the guideline, if implemented, will help manufacturers with strong competence and technological advantages to grow stronger in a steady manner," said a research note from China Fortune Securities Co.

Support is to be provided in a market-oriented manner, meaning that capital will be directed to aid competent companies in real economy sectors that are likely to yield returns to investors: it is a move within a broader picture of refocusing on the real economy, said the research note.

"Enterprises focusing on high-tech business and top players in their fields are more likely to get listed on various boards across the multi-pronged capital market in China, said a research note from Guoyuan Securities Co.