Between August 25 and 26, six major state-owned commercial banks—ICBC, Agricultural Bank of China, Bank of China, China Construction Bank, Postal Savings Bank of China, and Bank of Communications—announced they had taken the lead in implementing the loan interest subsidy policies for small and medium-sized enterprises (SMEs) and service sector operators, as outlined in the Notice on Further Improving Fiscal and Financial Coordination to Boost Domestic Demand (the "Notice") jointly issued by the Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration.

According to Lou Feipeng, a researcher at the Postal Savings Bank of China, subsidizing loan interest for SMEs and service sector operators directly reduces corporate financing costs, enhances their willingness to borrow, alleviates operational cash flow pressures, and improves the accessibility of corporate credit.

Expanded Scope and Increased Quotas for Subsidies

All six major state-owned banks clarified that, per the Notice's requirements, newly issued working capital loans to eligible small and medium-sized private enterprises will be included in the SME loan interest subsidy policy. For eligible working capital loans to private SMEs disbursed since August 1, 2026, the central government will provide an annual interest subsidy of 1 percentage point on the loan principal, with a subsidy period not exceeding two years.

Additionally, the cap on loan amounts eligible for SME interest subsidies per enterprise at a single bank has been raised from RMB 50 million to RMB 75 million annually, while the cap for service sector operator loans per enterprise at a single bank has been increased from RMB 10 million to RMB 20 million per year.

According to multiple banks, loans to service sector operators that meet subsidy conditions will be promptly submitted to relevant government departments for review. Once approved, banks will notify customers of the specific subsidy details via SMS, and individual customers can also check their status through mobile banking platforms.

Fu Yifu, a special researcher at Su Shang Bank, noted that the Notice extends the scope of subsidies from fixed asset investment to working capital loans for daily operations, better aligning with the actual operational needs of small and medium-sized private enterprises. It also incorporates various credit card installment products into the fiscal subsidy scope for personal consumption loans, covering diverse spending scenarios such as car purchases and home renovations.

On the quota side, subsidy ceilings for both enterprises and households have been significantly raised. Enterprises gain access to low-cost operating funds to stabilize supply, while households receive consumer credit support to unleash demand—forming a policy combination that simultaneously drives production supply and end-consumption. With the expansion of handling institutions, the policy achieves broader coverage and higher transmission efficiency, connecting both ends of supply and demand to clear bottlenecks in the domestic economic cycle and create greater policy synergy.

Lou Feipeng believes that production-side subsidies help enterprises maintain supply and expand capacity, while consumption-side subsidies help stimulate household demand. The recovery in demand, in turn, drives growth in corporate orders, closing the loop between consumption and production and jointly promoting sustained recovery of the domestic market.

Unlocking Incremental Business Opportunities

Assessing the impact on commercial banks, Fu Yifu stated that the subsidy policy presents a significant structural opportunity for credit expansion. By directly reducing the actual financing costs for businesses, it boosts borrowers' willingness to apply for loans and facilitates the recovery of operational lending demand.

From Lou Feipeng's perspective, the subsidy policy lowers actual corporate financing costs, improves the risk-return profile of operational loans, and helps stimulate corporate financing demand, thereby driving a rebound in banks' SME lending and service sector operational loan portfolios. Banks can also expand inclusive operational lending scale, deepen credit services for segmented service industry clients, and link comprehensive financial services such as settlement, payroll, and wealth management to enhance customer stickiness. Leveraging policy benefits, banks can optimize their inclusive customer base and strengthen both retail and corporate foundational client relationships.

The Notice also expands the scope of handling institutions for both SME and service sector loan interest subsidy policies to 21 national banks, as well as city commercial banks, rural cooperative financial institutions, private banks, and foreign banks with a financial regulatory rating of 3A or above.

"The substantial expansion of handling institutions brings more banks into the policy framework, creating incremental business space for the industry," said Fu Yifu. In terms of business growth, banks can use subsidized loans as an entry point to develop comprehensive services for corporate clients, such as settlement and payroll processing. Meanwhile, personal consumption loan subsidies serve as a lever to deepen retail client engagement, achieving balanced growth between interest and non-interest income.

Fu Yifu further suggested that during policy implementation, banks should focus on the following: first, optimizing internal processes to ensure eligible loans are included in subsidy applications in a timely manner; second, deepening government-bank collaboration by establishing regular communication mechanisms with fiscal and regulatory authorities to ensure smooth and efficient subsidy fund pre-allocation and review processes; third, leveraging subsidy policies to precisely address the financing needs of SMEs and service sector merchants, expanding the coverage of inclusive financial services; and fourth, strengthening policy communication and interpretation through both online and offline channels to clearly convey the subsidy scope and standards, ensuring that policy benefits reach the real economy directly.