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LU Yao: Aid incentives would help companies maintain sustainable growth


LU Yao, a professor and vice chair of the Department of Finance of the Tsinghua University School of Economics and Management, recently told the Economic Information Daily that the Chinese economy faces downward pressure because of domestic and international factors in the short term, adding that this situation won't last long.

Professor LU suggested the Chinese government should formulate an aid incentive policy to provide long-term support to companies in a more efficient way in order to ease the difficulties faced by small and medium-sized companies, in turn supporting the high-quality development of China's economy in the long run.

Professor LU said, "We could set up and use fund platforms, and use equity investment and loans as incentives to help companies out." She believes that they would be a good complement to tax cuts, subsidies, and other short-term measures for bailing out companies. "Aid incentives could have three-fold effects. They could ease the burden on the country's coffers; help small and medium-sized companies use idle social capital, raise funds, and expand the market; and allow companies to use funds more effectively," Professor LU said.

As for how to put aid incentives into practice, Professor LU said the rating mechanism and portfolio management need to be improved so that banks can easily identify companies worth investing in. "The financial sector can help us stabilize and boost the real economy," she said. Meanwhile, she believes the government should make full use of its financial, monetary, and industrial policies; mobilize various economic entities; and leverage social capital, government funds, and subsidies as external financing to bail out small and medium-sized companies.

Professor LU suggested that small and medium-sized companies should seize this transition period to upgrade their business and knowledge in order to prepare for faster growth in the future. She believes they should consider how to use new business models and big data to better understand the market, ease information asymmetry, reduce transaction costs, meet costumers' future needs, raise people's living standards, and facilitate two-way communication between consumers and companies. "In the long term, the technological revolution will certainly put Chinese economy on a fast-growing track," she said.

Professor LU pointed out that the COVID-19 pandemic has forced many companies to take their business online and provided more choices for them. She suggested companies should try to open their minds and consider how to boost the efficiency of their staff and stabilize their workforce. "By managing your workforce well, you will have a better cash flow and be able to attract and better use talent," she said, adding that remote working is very flexible and allows companies to attract more talent and reduce their labor transaction costs.

Editor: REN Zhongxi