China Launches $72 Billion Loan Guarantee Program to Boost Private Consumption and Investment

China Unveils Major Economic Stimulus Package

China's Ministry of Finance (MOF) announced on Tuesday, January 20, 2026, the launch of a significant 500 billion yuan (approximately $72 billion USD) state-backed loan guarantee program. This two-year initiative is designed to bolster private consumption and investment, forming a key part of Beijing's strategy to rebalance its economy and stimulate domestic demand. The program underscores the government's commitment to shifting away from an investment- and export-dependent growth model.

Program Details and Beneficiaries

The newly introduced loan guarantee facility is specifically aimed at encouraging private companies, particularly small and medium-sized enterprises (SMEs), to borrow for expansion and operational needs. Under the program, qualified private companies will be able to secure loans for various purposes, including:

• Equipment and raw material purchases
• Technology upgrades
• Fixed asset investments
• Participation in projects covered by policy bank financing tools
• Financing for daily operations, such as factory expansion and shop renovations

To further incentivize borrowing, an annual interest subsidy of 1.5 percentage points will be available for two years on eligible loans. Each borrower can receive subsidies on loans up to 50 million yuan.

Economic Context and Rationale

The introduction of this substantial program comes as China's economy has exhibited a 'two-speed pattern,' characterized by robust exports but persistent sluggishness in domestic consumption and an 'unprecedented slump' in investment. Policymakers have identified boosting domestic demand as a 'top economic priority' for 2026, aiming to counteract signs of deflation, trade tensions, and flatlining growth. The government seeks to transition the economy towards greater reliance on internal consumption, with the services sector highlighted as a crucial area for expansion.

Broader Economic Rebalancing Efforts

This loan guarantee program is part of a broader set of incentives and policies designed to foster economic stability and sustainable development. Experts from the Chinese Academy of Social Sciences note that the move focuses on the dual objectives of stimulating private investment and promoting consumer spending, sending a positive signal to the market. The National Financing Guarantee Fund will implement the program, covering both medium- and long-term financing needs. This strategic shift aims to build intrinsic stability for sustained development as China enters the first year of its 15th Five-Year Plan (2026-2030).