China will step up relief and assistance to market entities, especially micro, small, and medium-sized enterprises, and strengthen policy reserves, to ensure cross-cyclical adjustments, the State Council's executive meeting chaired by Premier Li Keqiang decided on Wednesday.

"Supporting market entities, especially the many micro, small, and medium-sized enterprises across sectors, is critical for maintaining steady growth and keeping jobs. Last year's experience shows that such an approach suits China's national conditions and economic structure," Li said.

Relief policies will be strengthened. The relending quota for small firms will be increased by another 300 billion yuan ($46.40 billion) this year. Local banks will be supported in issuing loans to micro and small enterprises and self-employed individuals.

Policies related to loan interest discounts and incentives for industries and firms seriously affected by COVID-19 will be fine-tuned. Banks will be encouraged to grant more inclusive credit-based loans to micro and small enterprises.

A risk compensation mechanism for the national financing guaranty fund will be put in place to support guarantee institutions in providing guarantees to micro and small enterprises that lack collateral or credit records.

The People's Bank of China will provide support in the form of rediscounts, to alleviate the pressure on micro, small and medium-sized enterprises caused by payment arrears.

"Micro, small and medium-sized enterprises create over 90 percent of jobs and generate more than 60 percent of GDP in China. Since the beginning of this year, due to rising production and operation costs caused by the commodity price rally, coupled with increasing accounts receivable and the impact of COVID-19 and natural disasters, they have been faced with mounting difficulties. Smaller businesses have yet to regain their footing, and we must take this seriously," Li said.

Reform of government functions will be further deepened, to improve the business environment and lower institutional transaction costs. Arbitrary levies and charges will be resolutely prohibited. Sustained efforts will be made in the special campaign against late or overdue payments.

Cross-cyclical adjustments will be made in a holistic way. Special local government bonds will be harnessed to expand effective investment. Follow-up policies will be studied and introduced as needed upon the expiry of some policies benefiting enterprises.

"There needs to be in-depth policy research on cross-cyclical adjustments. Given the recent new developments, the support policies about to expire should be better evaluated and preparedness enhanced in policy reserves," Li said.