Banking regulator aids SMEs

Smaller private companies may get easier access to credit even with the general background of tight monetary policy thanks to the efforts of the China Banking Regulatory Commission to help them in a time of rising costs and tightening credit.

The banking regulator recently urged commercial banks to take steps to help SMEs bridge financial difficulties by making maximum use of the increased quota for the development of small enterprises and make sure lending to those companies rises faster than overall loan growth.

"For the loans to small enterprises, interest rates should be at a level that limits risk but benefits the enterprises' sustainable development," Xinhua News Agency quoted Wang Zhaoxing, vice-chairman of CBRC, as saying.

The banks have also been urged to improve the network of outlets in the boomtowns that have dynamic private businesses and to diversify innovative funding channels for those enterprises.

Commercial banks have expanded credit in the second half of this year, prioritizing small firms, Wang said.

In early August, the People's Bank of China, China's central bank, decided to enhance the credit quota for 2008 by 5 percent for national banks and 10 percent for regional lenders in a bid to assist SMEs in their financing endeavors.

Many regional commercial banks have also taken measures to aid SMEs.

Before announcing the decision to lower the benchmark lending rate by 0.27 points to 7.20 percent last on September 15, China had raised interest rates five times this year and kept credit under strict control.

Together with the appreciation of the yuan and rising costs of labor and raw materials, tight monetary policies have contributed to the financial plight of SMEs, especially those heavily reliant on exports.

SMEs in China received only 300 billion yuan in credit in the January-March period, a fall of 30 billion yuan from a year ago and just 15 percent of the total 2.2 trillion yuan in credit extended in the three months, statistics from CBRC indicate.

As credit from commercial banks was rarely available, many SMEs had to adjust their production targets in the past few months, noted Liu Qingqing, associate professor of economics with South China Normal University.

"All in all, SMEs are weaker in their capability to weather tight monetary policies or economic turbulence," she noted.

Official statistics show that about 67,000 SMEs went bankrupt in the first half of this year and about 10 percent of the SMEs had industrial output grow by 30 percent from a year ago.

The growth rate was 15 percentage points lower than the comparable period in 2007.

Source: China Daily