China instructed the banking sector to increase financial support for upstream and downstream micro-, small- and medium-sized enterprises in the supply chain.

The country's banking and insurance regulator ramped up efforts to promote an increase of credit issuance to these companies and lower their financing costs, for many of them are private small businesses whose risk resistance capacity is weak, said Yang Liping, chief inspection officer of the China Banking and Insurance Regulatory Commission.

"To help small businesses maintain a steady cash flow to resume production, the China Banking and Insurance Regulatory Commission encouraged banks to increase the line of credit of core enterprises in the supply chain or support them in bond issuance," Yang said at a news conference held by the State Council Information Office on Friday.

"Having obtained loans, the core enterprises will make real-time payments in cash to suppliers after receiving goods or make advance payments to suppliers before receiving goods. Banks also encourage core enterprises in the supply chain to lower the percentage of the contract value that shall be paid in advance by downstream enterprises," she said.

The regulator also urged banks to directly provide financing to upstream and downstream enterprises in the supply chain based on real transactions, such as offering suppliers with accounts receivable financing, which allows companies to receive early payments on their outstanding invoices. Banks are also encouraged to provide downstream enterprises with loans pledged by warehouse receipts or inventory, in addition to offering advance payment financing based on orders, she said.