China to give companies new aid to cope with economic crisis

“Industrial growth is sharply declining and we have not seen a turning point yet. We feel a lot of pressure,” Li Yizhong said at a news conference.

The government will spend 15 billion yuan (US$2.2 billion) to subsidize loans to companies to improve technology and cut energy use, Li said. He said Beijing might buy surplus steel to help producers as demand plummets and cut taxes to spur auto and real estate sales.

The announcement comes amid mounting signs that China’s economic downturn might be sharper and deeper than expected. For the first time in seven years, exports fell in November.

Beijing launched a 4 trillion yuan (US$586 billion) stimulus package last month to help shield China from the global crisis by pumping money into the slowing economy through spending on construction and other projects. This week, the government injected 6 billion yuan (US$880 million) into two struggling state-owned airlines.

In its latest move, the government hopes the planned interest-free loans will stimulate 300 to 400 million yuan (US$44 billion to US$59 billion) in investment by companies in technology and energy efficiency, Li said. “Since we are now going through a market downturn, we have to invest more in business technology upgrading so that we will make the most of the upcoming economic upturn,” he said.

The measure will target smaller companies, which have been hit hard by a decline in exports, Li said. He acknowledged they are largely shut out of China’s state-owned banking system, forcing them to borrow from informal lenders at high interest, and said the government would help some to qualify for bank loans.

Li said steelmakers will receive aid to upgrade technology but he gave no details of which other industries might benefit.

“If we are able to provide this support, it will be critical to our response to the global financial crisis and the worldwide slowdown,” Li said.

China’s economy is still expected to grow by about 9 percent this year, down from last year’s 11.9 percent rate. But factory closures and layoffs have fueled government fears of unrest. Laid off workers have protested in Guangdong, the southeastern province near Hong Kong that is a hub for export-driven manufacturing.

“Industrial growth is sharply declining and we have not seen a turning point yet. We feel a lot of pressure,” Li said.

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