Tags: China | Credit | Small | Business

Report: China Promises More Credit to Small Business

Wednesday, 24 Feb 2010 07:41 AM

Regulators have ordered China's banks to step up lending to private businesses while restricting credit to local government projects, the industry regulator and a state newspaper said Wednesday.

The moves reflect government efforts to channel more credit to China's private sector while preventing overspending on unneeded real estate and other projects that Beijing worries could lead to financial problems.

Banks were ordered to lend more to small businesses this year than they did in 2009, the China Banking Regulatory Commission said on its Web site. That follows repeated government promises to help entrepreneurs who produce the bulk of China's growth and new jobs but largely missed out on stimulus aid last year.

Lenders could face punishment if they fail to comply, a CBRC supervisor, Xiao Yuanqi, was quoted as saying by the government-run China Daily Newspaper.

A flood of bank loans last year helped China rebound quickly from the global crisis but communist leaders worry it is fueling a dangerous bubble in stock and real estate prices and are trying to rein in what they see as reckless lending.

Lenders have been told to limit credit to local governments and reject projects that lack adequate capital, the state-run Shanghai Securities News said. It cited unidentified sources at Chinese banks and the CBRC did not immediately respond to requests by phone and fax to confirm the report.

Financial analysts have warned that Beijing's order to banks last year to pump up lending to support the stimulus would increase their levels of unpaid debts as ill-conceived projects failed.

Beijing has issued a series of directives to banks in recent months to tighten lending controls, apparently trying to fine-tune credit without raising interest rates, which might slow China's economic recovery.

Beijing has cut its target for total Chinese bank lending this year to 7.5 trillion yuan ($1.1 trillion), down from 9.6 trillion yuan ($1.4 trillion) lent last year under orders to support the stimulus.

Lending to companies accounted for 5.7 trillion yuan ($834 billion) of last year's total and 24.8 percent of that went to small enterprises, according to the central bank.

On Saturday, the CBRC ordered institutions to tighten controls on risk and scrutinize borrowers' ability to pay their debts.

The central bank has ordered institutions twice this year to increase the amount of money they hold in reserve in a move to prevent a surge in credit.

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Regulators have ordered China's banks to step up lending to private businesses while restricting credit to local government projects, the industry regulator and a state newspaper said Wednesday. The moves reflect government efforts to channel more credit to China's private...
China,Credit,Small,Business
396
2010-41-24
Wednesday, 24 Feb 2010 07:41 AM
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