The chairman of Xingfa voiced the chemical industry’s concerns at the State Council: financing is extremely difficult, and funds for relocation are tight!

　　On August 20, the first meeting of the State Council Leading Group for Promoting the Development of Small and Medium-sized Enterprises was held in Beijing. Vice Premier Liu He presided over the meeting and heard reports from relevant departments and participating representatives on the overall development of SMEs, the challenges of difficult and expensive financing, the implementation of fiscal and tax support policies, and import‑export performance. Li Guozhang, Party Secretary and Chairman of Xingfa Group, along with four other entrepreneurs, attended the meeting at invitation and delivered remarks.
　　As the sole entrepreneur representative from the chemical industry, Li Guozhang stated: “At present, the chemical sector has only just emerged from a period of sluggish performance, and enterprises continue to face numerous challenges. On this occasion, I earnestly urge the state to give high priority to addressing and studying four key issues, including difficulties in accessing financing and the high cost of capital.”
　　He pointed out that difficulty and high cost of financing have long been persistent, intractable challenges for small and medium-sized enterprises. First, credit approval processes are lengthy; some banks have reduced credit lines for the chemical industry, particularly making project‑loan approvals extremely difficult. Only a handful of banks accept applications for chemical‑industry project loans, and even when approved, securing actual drawdowns remains problematic, leaving chemical firms without adequate credit support for transformation and upgrading. Second, the collateral‑based asset‑pledge system and the credit‑guarantee framework are inadequate: banks favor land and real estate as collateral (accounting for 50%), while the pledge ratio for machinery and equipment is very low (10%). As a result, the tangible assets held by enterprises often fail to meet banks’ minimum collateral‑coverage requirements, further complicating efforts to obtain guarantees. Third, although the benchmark one-year loan rate stands at 4.35%, actual lending rates are typically marked up substantially. Meanwhile, bond‑market coupon rates are relatively high, and issuing bonds is fraught with difficulties. Fourth, the volume of bill discounting is substantial. Bank‑accepted bills have become the primary settlement instrument for domestic sales; companies must make rigid cash payments—covering loan repayments, interest, taxes, wages, and utility bills—by discounting these bills. Fifth, the practice of “using loans to attract deposits” persists. Driven by banks’ performance‑evaluation criteria on the loan‑deposit ratio, institutions require companies to maintain current‑account balances, open‑ended margin deposits, or full‑amount margin deposits equal to 10%–20% of their outstanding loan balances, effectively raising firms’ financing costs.
　　“We earnestly urge the relevant authorities to give high priority to the issues of difficult and expensive financing, and to further study and introduce policies that effectively reduce enterprises’ financing costs,” said Li Guozhang.
　　In addition, Li Guozhang put forward suggestions and recommendations on issues such as reducing electricity costs for small and medium-sized enterprises, supporting their transformation and upgrading, and encouraging technological innovation. He pointed out that, at present, the basic tariff for large industrial users in Hubei—110 kV—is 0.5738 yuan per kilowatt-hour; when combined with the basic capacity charge, the average electricity price for major power‑consuming enterprises stands at approximately 0.62 yuan per kilowatt-hour, resulting in very high energy costs. He recommended accelerating market‑oriented reforms of the power sector to effectively lower electricity expenses for businesses.
　　It is reported that Xingfa Group is advancing the transformation and upgrading of the Yichang New Materials Industrial Park. The total investment for the park’s relocation, renovation, and subsequent ancillary project development exceeds RMB 3 billion, and the dismantling of facilities along the river is expected to result in substantial asset losses. Li Guozhang has called on the state to formulate relevant policies to support the relocation, renovation, and transformation and upgrading of chemical enterprises located along the Yangtze River, and to assist these companies in securing special‑purpose subsidies from the relevant national authorities. He also urged the mobilization of private capital and government industrial funds to participate in and underpin the transformation and development of these enterprises; the provision of fiscal compensation and tax rebates to offset asset losses incurred during the demolition of riverside facilities; and support for enterprises seeking to issue long‑term, low‑interest green bonds.
　　He also recommended accelerating reforms to the existing management system for science and technology projects and the evaluation framework for research outcomes, gradually establishing a national innovation system that is driven by major national needs and centered on enterprises, and speeding up the deep integration of industry, academia, and research to enhance the country’s capacity for independent innovation.

Source: China Chemical Industry News