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Chapter 3 Promotion of Investment and Financing

Article 23 [Original Text]

Article 23 Financial institutions shall, in accordance with laws and regulations, develop and provide financial products and services tailored to the characteristics of the private economy in accordance with the principles of marketization and sustainable development. They shall facilitate financing for private economic organizations with good credit standing, enhance the compatibility between credit supply, loan cycles, and the financing needs and capital utilization cycles of private economic organizations, and improve the accessibility and convenience of financial services.

[Interpretation of the Provision]

Legislative Background and Purpose: Private economic organizations, especially small and medium-sized enterprises, often have financing needs characterized by “short-term, small amounts, frequent transactions, and urgency,” which traditional financial products and services struggle to fully address. This provision aims to guide financial institutions in innovating products and services to better accommodate the unique needs of the private economy.

Article Interpretation: a. “Within the framework of laws and regulations”: Emphasizes that financial innovation must not violate legal regulations or regulatory requirements. b. “Market-oriented and sustainable development principles”: Financial product and service innovation should follow market principles and achieve commercial sustainability, avoiding blind pursuit of scale at the expense of risk management. c. “Financial products and services tailored to the characteristics of the private economy”: Requires financial institutions to design specialized products and services based on the operational models, asset structures, and risk characteristics of private enterprises. For example, intellectual property pledge loans and investment-lending linkage for technology-based private enterprises; accounts receivable financing and order financing for order-driven enterprises; credit loans and on-demand borrowing and repayment products for individual businesses and small and micro enterprises. d. “Providing convenient financing conditions for private economic organizations with good creditworthiness”: For private enterprises with good credit records and sound operational performance, more favorable financing conditions and more convenient services should be provided. e. “Enhance the alignment of credit supply, loan cycles, and the financing needs and capital usage cycles of private economic entities”: This is a core requirement. It aims to address issues such as difficulty in obtaining loans (insufficient supply), slow loan processing (mismatched cycles), and mismatches between loan terms and actual capital needs. For example, provide medium- to long-term loans to support enterprise technological upgrades and equipment renewal, and offer revolving loans to meet daily operational cash flow needs. “Improving the accessibility and convenience of financial services”: Make it easier for private enterprises to obtain loans, simplify application processes, and enhance service experiences.

【Relevant Regulations】

● Policies and guidelines issued by financial regulatory authorities to encourage financial innovation and enhance the ability to serve the real economy. ● The Commercial Bank Law of the People's Republic of China: Defines the scope of business and operational principles for commercial banks.

【Practical Guidelines】

a. Private enterprises: Should proactively communicate their unique financing needs and challenges to financial institutions and actively explore and adopt new financial products. Maintaining a good credit record is crucial. b. Financial institutions: ● Conduct in-depth research on the needs of private enterprises, particularly those in niche industries or specific sectors, and develop customized, differentiated financial products. ● Streamline credit approval processes and leverage financial technology tools (such as big data risk management) to enhance approval efficiency and accuracy. ● Promote online financing services to reduce the number of times enterprises need to make in-person visits. ● Reasonably design loan terms and repayment methods to avoid cash flow tensions caused by mismatched terms. c. Industry Associations: They can organize matchmaking events between financial institutions and private enterprises, collect financing needs from enterprises, and provide feedback to financial institutions as a reference for product innovation. d. Regulatory Guidance: Financial regulatory authorities should encourage and support financial institutions to innovate products and services under controllable risk conditions, and evaluate and promote innovative outcomes.

Article 24 [Original Text]

Article 24 Financial institutions shall treat private economic organizations equally in terms of credit granting, credit management, risk control management, and service fees. If a financial institution breaches its agreement with a private economic organization borrower by unilaterally imposing additional loan conditions, suspending loan disbursement, or prematurely recalling loans, it shall be liable for breach of contract in accordance with the law.

【Interpretation of the Provision】

Legislative Background and Purpose: In practice, private enterprises sometimes face “ownership discrimination” from financial institutions during the financing process or encounter issues such as banks unilaterally changing conditions or withdrawing loans during the performance of loan contracts, which severely affect the normal operations of enterprises. This provision aims to emphasize the equal treatment of private enterprises by financial institutions and regulate their performance of obligations.

Provision Interpretation: a. First Paragraph: Equal Treatment: ● “Credit approval, credit management, risk control management, service fees, etc.”: These are key aspects of financial services. ● Credit Approval: When granting credit limits, financial institutions should not reduce the limit or impose stricter conditions solely because the enterprise is private. ● Credit management: Loan approval processes, disbursement conditions, and post-loan management should be applied equally. ● Risk management: Risk assessment standards and models should not be biased against private enterprises. ● Service fees: Loan interest rates and fees should not exceed those charged to enterprises of other ownership types under the same conditions. ● “Private economic organizations should be treated equally”: This is the core principle, prohibiting discrimination based on ownership type. b. Second clause: Standardizing contractual performance: ● “Violating agreements with private-sector borrowers”: This refers to situations where financial institutions breach the terms of the loan contracts they have signed with borrowers. ● “Unilaterally increasing loan disbursement conditions, suspending loan disbursement, or prematurely recalling loans”: These are common examples of bank breaches, often referred to as “loan withdrawal, loan suspension, or loan reduction.” These actions must be “unilateral” and “in breach of the agreement.” If the contract contains relevant provisions (e.g., the bank has the right to take corresponding measures when the enterprise's business conditions undergo significant adverse changes), the bank's actions may not constitute a breach of contract. ● “Bear legal liability for breach of contract”: If a financial institution breaches the contract, it shall bear liability for continued performance, remedial measures, or compensation for losses in accordance with the provisions of the Civil Code and other laws.

【Relevant Regulations】

● Civil Code of the People's Republic of China (Contract Section): Provisions on the conclusion, performance, and breach of contract liability of contracts (such as Article 465 on the legal protection of contracts, Article 509 on the parties' obligation to fully perform their obligations, and Article 577 on breach of contract liability). ● The Commercial Bank Law of the People's Republic of China: Article 35 stipulates that commercial banks shall comply with relevant regulations on asset-liability ratio management when granting loans. Article 42 stipulates that borrowers shall repay the principal and interest of loans on time. ● Regulations issued by financial regulatory authorities on standardizing bank service charges and prohibiting unreasonable loan withdrawals or terminations.

【Practical Guidelines】

a. Rights Protection for Private Enterprises: ● If encountering unfair treatment during the financing process, complaints may be filed with financial regulatory authorities. ● Carefully review the terms of the loan agreement, particularly those regarding loan disbursement conditions, the bank's right to unilaterally amend the contract, and conditions for early loan repayment. ● If the bank engages in breach of contract, loan withdrawal, or loan termination, the enterprise should promptly collect evidence and protect its rights through negotiation, mediation, arbitration, or litigation, demanding that the bank assume liability for breach of contract. b. Financial Institution Compliance: ● Strictly enforce credit policies that treat all types of enterprises equally, without establishing discriminatory internal regulations. ● Standardize loan contract texts, exercise contractual rights prudently, and avoid abuse. ● When an enterprise faces temporary difficulties but still has development potential, conduct a prudent assessment and avoid blanket loan withdrawals or terminations; consider assisting the enterprise through loan restructuring or renewal to help it overcome difficulties. c. Role of Lawyers: Lawyers can assist enterprises in reviewing loan contracts, assessing whether bank actions constitute breach of contract, and representing enterprises in rights protection efforts. d. Stabilizing Expectations: This provision helps stabilize financing expectations for private enterprises and reduces operational difficulties caused by banks arbitrarily withdrawing or terminating loans.

Article 25 [Original Text]

Article 25: Improve the multi-tiered capital market system and support qualified private-sector entities in obtaining direct financing on an equal footing through the issuance of stocks, bonds, and other means.

【Interpretation of the Provision】

Legislative Background and Purpose: Direct financing (such as equity financing and bond financing) is an important channel for corporate financing. Compared to indirect financing (bank loans), it offers advantages such as lower costs, longer terms, and the ability to improve capital structure. This provision aims to promote the development of the capital market and provide private enterprises with more opportunities for direct financing.

Provision Interpretation: a. “Establish a multi-tiered capital market system”: This refers to constructing a market structure that includes the main board, the STAR Market, the Growth Enterprise Market, the Beijing Stock Exchange, the National Equities Exchange and Quotations (NEEQ), regional equity markets (Fourth Board), and bond markets (exchange markets and interbank markets), among others, forming a complementary and interconnected market landscape to meet the financing needs of enterprises of different sizes and at different stages of development. b. “Supporting qualified private economic entities”: This emphasizes that private enterprises should have equal opportunities with state-owned enterprises when utilizing capital markets for financing, provided they meet the relevant listing or bond issuance conditions. c. “Issuing stocks, bonds, and other methods”: This lists the primary direct financing tools. ● Issuing stocks: This includes initial public offerings (IPOs), follow-on offerings (such as rights issues, share placements, and convertible bonds), etc. ● Issuing bonds: Includes corporate bonds, enterprise bonds, medium-term notes, short-term financing bills, private placement bonds, etc. d. “Equal access to direct financing”: The core is to eliminate any implicit barriers or ownership discrimination against private enterprises in areas such as issuance review and market access.

【Relevant Regulations】

● Securities Law of the People's Republic of China: Regulates the issuance and trading of stocks, corporate bonds, etc. ● Company Law of the People's Republic of China: Contains provisions on the issuance of stocks by joint-stock companies and the issuance of bonds by companies. ● Rules and guidelines issued by the China Securities Regulatory Commission, stock exchanges (Shanghai Stock Exchange, Shenzhen Stock Exchange, Beijing Stock Exchange), the National Equities Exchange and Quotations, and the National Association of Financial Market Institutional Investors regarding stock issuance and listing, and bond issuance and trading. ● Core rules under the registration system, such as the Measures for the Administration of the Registration of Initial Public Offerings of Stocks and the Measures for the Administration of the Registration of Securities Issuance by Listed Companies.

【Practical Guidelines】

a. Capital Operations for Private Enterprises: ● Private enterprises with development potential should actively plan to utilize the capital market for financing, selecting appropriate sectors and financing tools based on their own conditions. ● Improve corporate governance, enhance the quality of information disclosure, and meet the substantive conditions and procedural requirements for issuance and listing or bond issuance. ● Engage professional underwriters, law firms, accounting firms, and other intermediary institutions to provide services. b. Capital Market Reform: ● The state will continue to deepen capital market reforms, such as fully implementing the stock issuance registration system, optimizing issuance and listing conditions, and improving review efficiency and transparency. ● Develop and standardize private equity funds and venture capital funds to provide equity financing support for private enterprises in their startup and growth phases. c. Regulatory Authority Responsibilities: ● Securities regulatory authorities and self-regulatory organizations should adhere to the principles of openness, fairness, and impartiality when formulating rules and conducting reviews, treating all types of enterprises equally. ● Strengthen market supervision, crack down on illegal activities such as fraudulent issuance and false statements, and protect the legitimate rights and interests of investors. d. Bond Market Development: Encourage private enterprises to raise funds through the issuance of various bond products and enrich bond financing support tools for private enterprises (such as credit protection tools and guarantee enhancement).