MoF unveils subsidies for consumer and service sector loans

On Tuesday, the finance ministry (MoF) released an implementation plan to lower borrowing costs for the service sector.

• The State Council revealed earlier this month that the initiative was in the pipeline.

The details:

• Service sector firms are entitled to a 1 percentage point (ppt) rebate on business loan interest payments, covering loans up to RMB 1 million.
• This covers firms operating in catering, accommodation, healthcare, eldercare, childcare, housekeeping, entertainment, tourism, and sports.
• Households will also enjoy a 1 ppt rebate on consumer loans up to RMB 50,000.

MoF will cover 90% of the interest rate subsidies, with provincial governments making up the remainder.

The subsidies – which will last for 12 months – apply to:

• Loans to service companies made between March 16 and December 16 this year.
• Consumer loans made between September 1 this year and August 31, 2026.

Twenty-one banks have been approved to make subsidized loans.

Get smart: Subsidizing business loans is a sensible strategy.

• Beijing believes a supply shortage of high-quality services has constrained consumer spending, and that boosting service sector investment will unlock this latent demand.

Get smarter: But achieving sustainable services consumption will require greater demand-side support.

• There is already a plentiful supply of cheap credit, meaning Beijing’s consumer loan rebate will do little to boost household credit demand.

Get even smarter: Funding for Beijing’s consumer goods trade-in program will be exhausted by the end of the year.

• We suspect the interest rate subsidy program is timed to support consumption as the trade-in program wanes.