China regulator calls for more lending to small firms: Report
China’s banking regulator is calling on banks and other lenders to
provide more loans to small enterprises, highlighting growing government
concerns about the need to boost growth and create jobs.
Financial institutions must “make maximum use” of a five-percent
increase in the loan quota, focusing the money on small enterprises, the
China Banking Regulatory Commission (CBRC) said in a statement on its
website.
They must also make sure that lending to those companies rises faster
than overall loan growth, according to the statement, which was posted
Tuesday.
Interest rates on the loans should be set at a level that limits
risks but “supports the sustainable development of the small
enterprises,” it said.
The banks were also told to open more outlets where private business
is active and provide more innovative funding channels, such as allowing
equity shares and intellectual property rights as loan security for
those enterprises.
The statement was posted one day after the central bank published a
note on its website pledging to expand loan access for three sectors,
including small companies.
“Small- and medium-sized enterprises have been under big pressure
amid the global economic slowdown,” said Li Ruoyu, an economist with the
State Information Centre, a government think tank.
“They are a key job creator ... and it is a more dynamic part of the
economy. So the government wants to reduce the impact (from slowing
exports) by providing some financial support,” she said.
China’s central bank last month raised this year’s quota of new yuan
loans by five percent, the official Xinhua news agency said earlier.
The previous cap was widely understood to be no more than 3.63
trillion yuan (530 billion dollars), the same amount as was lent in
2007, as the government intended to curb the country’s runaway inflation
using a tight monetary policy.
Stephen Green, an analyst with Standard Chartered in Shanghai, said
the credit controls had particularly affected small and medium-sized
enterprises, as banks tend to lend to large state-owned companies.
Smaller companies have little other choice, since borrowing from
private lenders tends to be much more costly, he argued.
“If you are able to access financing, it’s much more expensive, which
of course puts severe pressure on the small and medium-sized
enterprises,” he said.
Chinese lenders extended 2.5 trillion yuan of new loans in the first
six months of the year, according to central bank figures. In the first
five months, 16.2 percent of all new loans were to small and
medium-sized firms.
BEIJING, Wednesday,
AFP |
