Following the joint issuance on August 18 by the Ministry of Finance, the People's Bank of China, and the Ministry of Human Resources and Social Security of the “Notice on Further Improving Small-Amount Guarantee Loans and Actively Promoting Entrepreneurship to Boost Employment,” which raised the maximum loan amount for individual small-amount guarantee loans from RMB 20,000 to RMB 50,000 and increased the maximum loan amount for small labor-intensive enterprises from RMB 1 million to RMB 2 million, the three ministries further relaxed the loan limits for small and medium-sized enterprises. On August 28, the three ministries jointly issued the “Administrative Measures for Fiscal Interest Subsidies for Small-Amount Guarantee Loans,” thereby re-regulating matters related to SME loans. Effective from the date of issuance of this document, the “Notice of the Ministry of Finance, the People's Bank of China, and the Ministry of Labor and Social Security on Issuing the ‘Administrative Measures for Fiscal Interest Subsidies for Small-Amount Guarantee Loans for Laid-off and Unemployed Personnel Engaging in Micro-profit Projects’” (Cai Jin [2003] No. 70) shall be repealed.

Administrative Measures for Fiscal Subsidies on Small-Amount Guaranteed Loans

1. General Provisions

Article 1: In order to effectively promote employment and strengthen the management of fiscal interest-subsidy funds for small-amount guaranteed loans to laid-off and unemployed personnel (hereinafter referred to as "small-amount guaranteed loans"), and to enhance the efficiency of using these fiscal interest-subsidy funds, this Regulation is formulated in accordance with the spirit of the "Employment Promotion Law of the People's Republic of China," the "Notice of the State Council on Doing a Good Job in Promoting Employment" (Guofa [2008] No. 5), and relevant documents governing small-amount guaranteed loan policies.

Article 2: The fiscal interest-subsidy funds for small-amount guarantee loans referred to in these Measures (hereinafter referred to as “interest-subsidy funds”) shall mean the fiscal interest subsidies provided by the state to borrowers of small-amount guarantee loans who meet prescribed conditions (hereinafter referred to as “borrowers”) for their use in micro-profit projects, as well as the fiscal interest subsidies provided by the handling banks to labor-intensive small enterprises that meet prescribed conditions (hereinafter referred to as “small enterprises”).
According to national regulations, subsidized interest funds can be used to support the improvement of local guarantee fund risk compensation mechanisms and small-amount guaranteed loan incentive mechanisms.

Article 3: The micro-profit projects referred to in these Measures shall be determined by the people's governments of provinces, autonomous regions, and municipalities directly under the central government in light of local conditions, and shall be filed with the Ministry of Finance, the People's Bank of China, and the Ministry of Human Resources and Social Security.
The loans referred to in these Measures are small-amount guaranteed loans issued by the handling banks in accordance with the provisions of documents such as the “Administrative Measures for Small-Amount Guaranteed Loans for Laid-off and Unemployed Personnel” (Yin Fa [2002] No. 394, hereinafter referred to as the “Small-Loan Measures”).
The guarantee institutions referred to in these Measures are those that, in accordance with the provisions of the “Small Loan Measures,” are entrusted with managing and operating small-loan guarantee funds.
The “operating banks” referred to in these Measures shall mean financial institutions such as state-owned wholly-owned commercial banks, joint-stock commercial banks, city commercial banks, and urban-rural credit cooperatives that have signed cooperation agreements with guarantee institutions.

1. Budget Management of Subsidized Interest Funds

Article 4: With the exception of the seven coastal provinces and cities in eastern China (Beijing, Shanghai, Shandong, Jiangsu, Zhejiang, Fujian, and Guangdong, hereinafter referred to as the “seven provinces and cities”), the portion of interest-subsidy funds required by other provinces (autonomous regions, and municipalities) that is borne by the central government shall be allocated by the Ministry of Finance as special funds based on the projected loan disbursement amount and the nationally prescribed interest-subsidy standards, and shall be included in the central government’s budget. The portion of interest-subsidy funds that is borne by local governments shall be arranged through local government budgets.
The funds required for interest subsidies on loans in the seven provinces and cities will be allocated from local fiscal budgets.
Article 5: Based on applications submitted by provincial-level financial authorities (including cities under separate planning, but excluding the seven provinces and cities; hereinafter referred to as “provincial-level financial authorities”), the Ministry of Finance shall, after review, pre-allocate subsidized interest funds to the applicant localities and conduct a final settlement at year-end. Provincial-level financial authorities shall pre-allocate subsidized interest funds to municipal-level financial authorities on a quarterly basis.
Article 6: Fiscal departments at all levels across the country shall, in accordance with the state’s regulations on the management of special funds for employment, properly handle the final accounting of interest-subsidized funds.
The provincial-level fiscal authorities shall prepare the annual final accounts for subsidized interest funds within two months after the end of the fiscal year, attaching the review opinion of the Fiscal Inspection Office of the Ministry of Finance stationed locally (hereinafter referred to as the “Inspectorate Office”), and submit them to the Ministry of Finance for review and settlement.
The financial departments of the seven provinces and cities shall prepare the annual final accounts for subsidized interest funds within two months after the end of the fiscal year, attach the review opinions from the special commissioner's office, and submit them to the Ministry of Finance for filing.
Article 7: Based on the annual financial statements of small-amount guarantee loans from each province (autonomous region, municipality), and after review and confirmation, the central and provincial finance authorities shall allocate risk compensation funds for the guarantee fund and loan incentive subsidies from the interest-subsidy funds.

Chapter Three Application and Review of Interest-Subsidized Loans
Article 8: No interest subsidies will be provided for extensions or overdue payments on small-amount guaranteed loans.
Interest subsidies for small-amount guaranteed loans are calculated based on the actual loan amount and the interest calculation period, within the prescribed loan limits and subsidy periods.

Article 9: Borrowers and small enterprises must submit their applications for subsidized loans to the handling bank, providing the review and confirmation opinion issued by the labor security authorities.

Article 10: The handling bank shall review loan applications from borrowers and small enterprises. If the applications meet the relevant regulations, the bank shall disburse subsidized loans, affix a special seal for subsidized loans to the loan contract, and make a corresponding note in the guarantee contract signed with the guarantee institution.
Chapter Four Review and disbursement of subsidized interest funds
Article 11: The handling bank shall calculate the interest subsidy amount due for micro-profit projects and small enterprise micro-guaranteed loans in accordance with relevant provisions of the national financial accounting system and the micro-guaranteed loan policy. The timing for calculating the interest subsidy shall be determined based on the interest settlement dates of the loans handled by the bank.

Article 12: The handling bank shall apply to the financial department for subsidized interest funds on a quarterly basis.

Article 13: The application, review, and disbursement of subsidized interest funds shall be handled according to the following procedures:
(1) Within 5 business days after the end of each quarter’s interest accrual date, the city-level handling bank shall submit to the city-level finance department an application for subsidized interest funds along with a detailed list, accompanied by a list of interest collected on micro-profit projects and small enterprise loans.
The application for subsidized interest funds should include information such as the loan amount incurred, the balance at the beginning of the quarter, the balance at the end of the quarter, the number of loans issued, and the amount of interest subsidy requested. The detailed list should include, for each loan, the project name, loan amount, disbursement date, term, borrower’s name, and place of household registration.
(2) Within 5 working days of receiving the application from the handling bank, the municipal finance department shall review and disburse the subsidized interest funds, and at the same time, report the disbursement and use of these funds to the provincial finance department and the commissioner’s office for record-keeping.
(3) Within 20 days after the end of the fiscal year, the city-level handling banks shall submit to the city-level finance department a consolidated report on the application for subsidized interest funds for the previous year, along with a detailed breakdown. The guarantee institutions shall submit to the city-level finance department, for review and settlement, a summary table of small-loan guarantee disbursements categorized by handling bank.
The table of small-loan guarantee issuance includes the project name, loan amount, guarantee amount, issuance date, term, borrower’s name, and registered domicile for each loan guarantee.
(4) After receiving the materials from the handling bank and the guarantee institution, the municipal finance department shall, within 10 working days, review the relevant information and issue its opinion, attaching the materials provided by the handling bank and the guarantee institution, and then submit them to the provincial finance department and the commissioner’s office.
(5) The provincial finance departments and the commissioner offices shall review the materials submitted by the municipal finance departments and issue their opinions. Within two months after the end of the fiscal year, they shall prepare the annual final accounts for subsidized interest funds and submit them to the Ministry of Finance for review and settlement.

Chapter Five? Review and disbursement of award and subsidy funds
Article 14: Based on the annual financial statements of small-amount guarantee loans submitted by each province (autonomous region, municipality), and after review and confirmation, the central government finance will allocate a portion of funds from the annual budget for interest subsidies as risk compensation funds, at a certain percentage of the total newly added guarantee fund amount for those regions where the scale of the guarantee fund has grown annually by a specified proportion. These risk compensation funds will be managed by local governments and will entirely replenish the local guarantee funds, with the purpose of encouraging guarantee institutions to lower or eliminate counter-guarantee requirements.

Article 15: Based on the annual financial statements of small-amount guarantee loans submitted by each province (autonomous region, municipality), and after review and confirmation, a reward-based subsidy shall be granted at a certain percentage of the newly issued small-amount guarantee loans for the year. The subsidy shall be shared equally between the central and provincial-level finances, with the portion allocated by the central finance being drawn from the central budget earmarked for interest subsidies. The reward and subsidy funds shall be managed by local governments and used to provide operational funding support to institutions that have demonstrated outstanding performance in small-amount guarantee loan programs, including handling banks, guarantee agencies, and credit communities.

Chapter Six Reporting System  
Article 16: The provincial finance departments and the finance departments of the seven provinces and cities shall submit to the Ministry of Finance, on a quarterly basis, statistical reports on the disbursement of subsidized-interest loans, reflecting the quarterly amount disbursed, outstanding balance, number of loans disbursed, cumulative number of loans disbursed this year, amount of interest subsidy due, actual amount of interest subsidy paid, and detailed breakdown by type of handling bank, as well as the utilization and balance of interest-subsidy funds allocated by the central government or budgeted by the seven provinces and cities. The submission deadline is before the 15th day of the following quarter.
The financial departments of prefectural-level cities shall, in accordance with the provisions of the preceding paragraph, submit to the provincial-level financial departments on a quarterly basis a statistical report on the disbursement of subsidized-interest loans. The submission deadline is before the 10th day of the next quarter.

Article 17: The provincial finance departments and the finance departments of the seven provinces and cities shall, every six months, conduct a thorough analysis—submitted in writing—to the Ministry of Finance of the status of disbursement and allocation of subsidized interest loans and subsidy funds within their respective regions, as well as any issues identified.
Chapter Seven Supervision, Management, and Accountability
Article 18: The handling bank shall conscientiously fulfill the following duties:
(1) Review whether the loan project qualifies as a subsidized-interest project.
(2) Supervise the use of subsidized loans to ensure that they are directed toward low-profit projects and small enterprises that meet the required criteria.
(3) Maintain a separate ledger for subsidized-loan business, properly store loan contracts and related business documents, and cooperate with inspections conducted by relevant authorities.
(4) Diligently perform the review and application procedures for loan interest subsidies.
(5) Other duties required to be performed in accordance with relevant regulations.

Article 19: The guarantee institution shall actively provide effective guarantee services to borrowers and carefully verify and confirm the details of the guaranteed loan projects, including the loan amount, disbursement date, term, and interest rate.

Article 20: The financial department shall conscientiously perform the following duties:
(1) Provide guidance on the application and review processes for loan interest subsidies within the jurisdiction;
(2) Properly coordinate and cooperate with relevant departments and the handling banks;
(3) Rigorously review interest subsidy applications in accordance with relevant regulations, promptly disburse the interest subsidy funds, and enhance the efficiency of using these funds.
(4) Strengthen supervision and management of subsidized interest funds to ensure that these funds are used exclusively for their intended purpose. Conduct regular or irregular inspections of the use of subsidized interest funds, promptly address and report any issues identified in the course of work, and ensure that the subsidized interest policy is effectively implemented.
(5) Strengthen the management of risk compensation funds for guarantee funds and incentive subsidies for loans;
(6) Other duties required to be performed in accordance with regulations.

Article 21: The Commissioner’s Office is responsible for the supervision and management of the allocation and use of local interest-subsidy funds, and shall conduct inspections on an irregular basis.

Article 22: If borrowers and small enterprises provide false supporting documents, and the labor security authorities and the handling banks—as well as other relevant institutions—fail to diligently fulfill their review responsibilities, resulting in the fraudulent acquisition of subsidized fiscal funds, the labor security authorities and the handling banks, among other relevant institutions, shall each bear responsibility according to their respective duties. They shall also jointly be responsible for recovering the subsidized funds and recording the borrowers and small enterprises in their bad credit records.

Article 23: If a handling bank submits false documentation to fraudulently obtain fiscal interest subsidy funds, the financial authorities shall recover the subsidized funds, impose penalties in accordance with relevant national regulations, and publicly expose the incident through the media.

Article 24: If fiscal departments and guarantee institutions at all levels fail to fulfill their duties diligently, or falsify documents and fraudulently obtain or misappropriate fiscal interest-subsidy funds, the Ministry of Finance will take measures such as ordering rectification and recovering the subsidized funds already disbursed, and will impose penalties in accordance with relevant national regulations.
Chapter Eight Supplementary Provisions
Article 25: The financial departments of each province, autonomous region, municipality directly under the central government, and city designated as separate planning entities may, in conjunction with the Commissioner’s Offices and relevant departments, formulate specific operational procedures for the management of interest-subsidized funds, risk compensation funds for guarantee funds, and loan incentive funds, based on the spirit of these Measures and other relevant documents, and in light of local conditions. Such procedures shall be submitted to the Ministry of Finance for record.

Article 26: Any relevant provisions on micro-guaranteed loans already issued by the People's Bank of China, the Ministry of Finance, the former Ministry of Labor and Social Security, and other departments shall be superseded by the provisions of this Measures if they are inconsistent with the provisions herein.