As of August 26th, six large state-owned commercial banks, namely Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, Construction Bank, Bank of Communications, and Postal Savings Bank of China, have successively released announcements or customer Q&A on the latest optimization of interest subsidy policies for loans to small and medium-sized enterprises and service industry operating entities. Six banks have explicitly stated that for working capital loans issued to small and medium-sized private enterprises that meet the conditions since August 1, 2026, the central government will provide an annual interest subsidy support of 1 percentage point with a term not exceeding 2 years. This means that the "policy combination punch" of fiscal and financial synergy to promote domestic demand has undergone a comprehensive upgrade with greater intensity and wider coverage after more than 7 months of operation, and the "leading goose" effect of state-owned banks is further amplified.
The scope of interest subsidies has expanded from fixed loans to current loans
The core basis for this round of policy adjustments is the "Notice on Further Improving the Policy of Fiscal and Financial Coordination to Promote Domestic Demand" jointly issued by the Ministry of Finance, the People's Bank of China, and the State Administration for Financial Regulation (Caijin [2026] No. 71). The notice will be implemented from August 1st, and the original policy has been systematically optimized from three dimensions: the scope of interest subsidies, the handling institutions, and the upper limit of the quota.
In terms of the scope of interest subsidies, newly issued working capital loans to eligible small and medium-sized private enterprises will be included in the support scope - previously only covering fixed asset loans. The number of handling institutions has increased from about 100 to about 400, including 21 national banks and city commercial banks with financial regulatory ratings of 3A or above, rural cooperative financial institutions, private banks, and foreign banks. In terms of the upper limit of the loan amount, the maximum loan size that a single enterprise can enjoy subsidized interest in a single bank has been increased from 50 million yuan per year to 75 million yuan, and the maximum loan size for a single service industry operating entity has been increased from 10 million yuan per year to 20 million yuan.
State owned banks played the role of "leading geese" in the implementation of this policy. For example, Industrial and Commercial Bank of China has clarified that the maximum loan size that a single account can enjoy interest subsidies at the bank has been increased from 50 million yuan to 75 million yuan. Agricultural Bank of China has synchronously adjusted the upper limit of interest subsidy quota. Construction Bank announced that from August 1st, newly issued working capital loans for eligible small and medium-sized private enterprises will be included in the scope of interest subsidies. Postal Savings Bank of China responded to market concerns in the customer Q&A system, explicitly including working capital loans in the scope of interest subsidy support, and raising the upper limit of single account loan size to 75 million yuan. Six banks also remind that they will not entrust any third party or charge any fees in the process of handling interest subsidy business. For loans processed between August 1st and the announcement, banks will directly submit them to relevant government departments for review, without the need for corporate operations.
Policy combination continues to exert force
The introduction of the new interest subsidy policy is based on the significant achievements of previous policies. According to data from the Ministry of Finance, from January to July this year, through four investment promotion policies including interest subsidies for loans to small and medium-sized enterprises, equipment renewal loans, special guarantee plans for private investment, and risk sharing mechanisms for private enterprise bonds, as well as two consumption promotion policies including interest subsidies for loans to service industry operators and personal consumption loans, a total of over 20 trillion yuan of new credit has been issued in related fields, an increase of over 880 billion yuan or 4.5% compared to the same period last year. Among them, four investment promotion policies have cumulatively supported private investment of about 1.51 trillion yuan, and two consumption promotion policies have cumulatively supported household consumption of about 1.88 trillion yuan. Since the implementation of the policy more than 7 months ago, it has benefited 6.22 million enterprises and 113 million residents. As of the end of the first quarter of 2026, the balance of RMB inclusive small and micro loans reached 38.38 trillion yuan, a year-on-year increase of 10.3%, with a growth rate 4.6 percentage points higher than various loans. The balance of inclusive small and micro loans of the six major state-owned banks has exceeded 18 trillion yuan, accounting for 47% of the entire industry.
From a policy logic perspective, including working capital loans in the scope of interest subsidies this time responds to the most urgent practical needs of small and medium-sized enterprises. Previously, fixed asset loan interest subsidies mainly served the expansion of production and equipment renewal for enterprises, but what a large number of small and medium-sized enterprises need most in their daily operations is short-term liquidity turnover support. Including working capital loans in the scope of interest subsidies means that policy dividends extend from the "investment end" to the "operation end", covering the entire chain of funding needs of enterprises from starting production and material preparation, paying wages to purchasing raw materials. Industry insiders have pointed out that after a 1 percentage point government subsidy, the actual financing cost of enterprises will significantly decrease, which will help alleviate the financial pressure and investment wait-and-see sentiment of small and medium-sized enterprises due to profit pressure.
The significant increase in the upper limit of the quota also has practical relevance. A 50% increase means that more medium-sized enterprises can also fully enjoy policy dividends. The expansion of the handling agencies from about 100 to about 400 has directly opened service windows to the "doorstep" of more business entities, effectively bridging the "last mile" of financing.
It is worth noting that the policy "toolbox" will continue to be strengthened. Vice Minister of Finance Liao Min recently stated at a press conference of the State Council Information Office that, in response to the needs of economic development, the Ministry of Finance is continuing to study and formulate new policies and measures for fiscal and financial coordination, which will be launched in the second half of this year. Pang Ming, a member of the China Chief Economist Forum, believes that by expanding the scope of interest subsidies and appropriately increasing the amount, the cost of using funds for equipment updates and technological upgrades by private capital can be directly reduced. Hu Yuwei, Chief Analyst of Policy Research at CITIC Securities, predicts that in the implementation of new policy based financial instruments, further emphasis will be placed on supporting private investment projects and industrial projects.
From a more macro perspective, fiscal interest subsidies are essentially using fiscal funds to leverage bank credit and guiding market expectations with policy signals. Dong Ximiao, Chief Economist of the China Merchants Association, stated that the central government's allocation of special funds for interest subsidies not only directly reduces the financing costs of enterprises, but also guides credit resources towards small and medium-sized enterprises by lowering the risk premium expectations of banks. The collective action of six state-owned banks, the comprehensive deployment of 400 handling institutions, and the expansion of interest subsidies from fixed asset loans to working capital loans are unleashing increasingly strong policy effectiveness. With the introduction of more new policies and measures in the second half of the year, the institutionalized and normalized path of fiscal and financial synergy to promote domestic demand is gradually becoming clear, and the financing environment for small and medium-sized enterprises and the private economy is expected to see greater improvement. (Looking into the New Era)