China Scales Government Financing Guarantees to Support Employment and Entrepreneurship

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In late 2025, China’s central government took strategic action to enhance the role of government-backed financing guarantees as a catalyst for employment and entrepreneurship. A key policy document, the Guiding Opinions on Further Leveraging the Government Financing Guarantee System to Support Employment and Entrepreneurship, jointly issued by multiple ministries, refines the operational framework for financing guarantees and expands their reach to better align with national employment and entrepreneurship objectives.

The policy represents a shift toward more targeted support for small and micro enterprises (SMEs), labor-intensive firms, and priority employment groups through structured risk sharing, incentive mechanisms, and coordinated financial-employment policy tools.

Executive Summary

  • Authority and policy document: The Guiding Opinions on Further Leveraging the Government Financing Guarantee System to Support Employment and Entrepreneurship (财金〔2025〕135号) was jointly released by the Ministry of Finance, Ministry of Human Resources and Social Security, People’s Bank of China, and China Banking and Insurance Regulatory Commission on 26 December 2025.
  • The policy aims to expand the scope and effectiveness of government financing guarantee services, making them more responsive to employment and entrepreneurship needs, particularly for SMEs and key demographic groups.
  • It introduces quantitative performance measures, such as an employment contribution indicator to better align guarantee resource allocation with employment outcomes.
  • The policy incorporates targeted mechanisms including differentiated fee incentives, lowered entry thresholds for guarantees, and expanded coverage of priority employment groups to enhance the accessibility and impact of financing support.
  • It emphasizes policy coordination between financing guarantees and other fiscal and monetary tools like loan interest subsidies to address financing difficulty and high costs.
  • These changes are positioned within broader national priorities to stabilize employment, expand domestic demand, and support economic resilience amidst structural adjustments.

Role of Government Financing Guarantees

Government financing guarantees in China function as credit enhancement tools that enable lenders to extend loans to borrowers, especially SMEs and startups, by sharing or assuming credit risk. Historically, access to credit has been a barrier for small firms and first-time entrepreneurs due to limited collateral and credit histories. By providing partial or full guarantees, government-linked guarantee institutions help reduce perceived lending risk and expand credit availability, thereby supporting employment creation through business expansion.

In recent years, the financing guarantee framework has evolved into a multi-layered system comprising the National Financing Guarantee Fund, provincial re-guarantee entities, and municipal or county-level direct guarantee institutions. This network is intended to distribute risk and mobilize institutional capacity at multiple administrative levels.

Aligning Finance with Employment Policy

Employment remains a priority of central governance. The Guiding Opinions explicitly positions the financing guarantee system as an instrument that supports the employment priority strategy, which is embedded in broader national socio-economic plans to stabilize jobs and reduce structural unemployment risks. By strengthening the employment-oriented deployment of guarantees, the policy intends to leverage financial tools to generate tangible job creation outcomes.

This orientation links financial support directly to employment objectives, signaling an evolving role for government guarantees beyond financial intermediation toward employment catalysis.

Enhancing Precision and Incentive Alignment

A distinctive feature of the policy is its emphasis on quantitative performance measurement and incentives. The introduction of an employment contribution indicator creates a measurable metric that informs the allocation of guaranteed resources based on demonstrated job support impact.

Additionally, the policy establishes linked incentive mechanisms that connect performance metrics with practical benefits such as:

  • Re-guarantee fee subsidies and discounts for high-performing guarantee institutions.
  • Allocation of guaranteed capacity tied to employment outcomes; and
  • Innovative product incentives tailored for high-employment sectors and labor-intensive firms.

These mechanisms reflect a strategic shift from broad quantitative expansion of guaranteed issuance toward targeted, quality-oriented support that prioritizes employment stimulation.

Expanded Coverage and Accessibility

The policy explicitly extends financing support to a broader set of target groups and business categories to strengthen financial inclusion, such as:

  • SMEs with strong job-creation potential and labor-intensive business models.
  • Priority entrepreneurial groups, including fresh graduates, vocational graduates, unemployed workers, returnee entrepreneurs, and veterans.

To reduce access barriers, the guidance includes measures to lower or remove collateral requirements for eligible firms with substantial employment impact, thereby enhancing accessibility for first-time entrepreneurs and high-employment micro-businesses.

Incentivizing Innovation and Collaboration

The policy encourages collaboration among financial institutions, guarantee providers, and government bodies to develop specialized financial products that integrate employment-centric considerations, such as loans designed to support payroll or job preservation. These products are intended to respond to both cyclical and structural funding needs of employers.

Coordinated Policy Implementation

Recognizing that financing alone cannot address all employment constraints, the guidelines promote enhanced coordination with loan interest subsidies, risk compensation mechanisms, and other fiscal and monetary interventions. This creates a more coherent and supportive policy ecosystem that balances risk mitigation and cost reduction for borrowers.

Amplified Employment Impact

By directing guarantee resources toward firms and sectors with demonstrated capacity to stabilize and expand employment, the policy aims to amplify employment outcomes per unit of financial support. The use of an employment contribution metric is designed to align incentives and direct capital toward labor-absorbing industries, potentially supporting both urban and rural employment growth.

Support for Small and Micro Enterprises

Small and micro enterprises are major sources of job creation but often face greater financing hurdles. The policy’s emphasis on reducing entry barriers, coupled with differentiated incentives for high-employment institutions and products, enhances the credit environment for SMEs, making government finance guarantees more impactful in fostering entrepreneurship and innovation.

Enhanced Financial System Effectiveness

Improving the efficiency and targeting of financing guarantees enhances the overall effectiveness of the financial system in supporting real economic activity. By encouraging risk sharing, expanding partnerships between guarantee institutions and banks, and enhancing product innovation, the policy contributes to a more dynamic and responsive financial ecosystem.

What This Means for Business

  • Greater Access to Credit:
    Firms, particularly SMEs with job-creation potential and labor-intensive business models, may find it easier to secure financing thanks to lower collateral requirements and government-backed risk mitigation.
  • Incentives for Employment Growth:
    Businesses that scale their workforce and demonstrate stable employment outcomes might benefit from improved access to financing guarantees and related fee incentives.
  • Expanded Entrepreneurship Support:
    Entrepreneurs from a broader set of demographic groups, including graduates and vocational trainees, will have enhanced access to guarantee-backed startup finance.
  • Financial Product Innovation:
    Banks and guarantee institutions may develop more tailored financial products that align with employment and entrepreneurship goals, creating novel financing options for business models prioritizing human capital.
  • Policy Synergies:
    Enhanced coordination with other fiscal and monetary tools means businesses can potentially benefit from multi-layered policy support, for example, combine guarantee coverage with interest subsidies or risk compensation schemes.

Sources

  • Guiding Opinions on Further Leveraging the Government Financing Guarantee System to Support Employment and Entrepreneurship (关于进一步发挥政府性融资担保体系作用 加力支持就业创业的指导意见), Ministry of Finance, Ministry of Human Resources and Social Security, People’s Bank of China, and China Banking and Insurance Regulatory Commission, 26 December 2025 (财金〔2025〕135号).
    https://finance.sina.com.cn/jjxw/2025-12-28/doc-inheivtn8748888.shtml (Sina Finance)
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