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| Banking Regulator Urges Increased Loans |
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The China Banking Regulatory Commission (CBRC) is also working with the People's Bank of China (PBC), or the central bank, on the possibility of allowing more funding channels, including privately-owned small loan lenders, for cash-hungry businesses, mostly private firms. "But the commercial nature must be ensured," said Wang Zhaoxing, assistant chairman of CBRC, emphasizing that lending to small businesses must be done in a commercial environment and profitability will not be sacrificed. Proposed policy incentives include business tax reductions for income from loans to small businesses and creating credit records for small businesses. The CBRC is also considering allowing the establishment of private lending agencies that make loans to small businesses from shareholders' capital instead of depositors' money. "Under the pre-conditions of appropriate guidance and effective supervision, private small-loan businesses can also become an effective complement (to small business financing)," Wang said. Earlier sources said the CBRC is also drafting a regulation that requires all banking institutions to lend a percentage of deposits where they are taken, which would also benefit small businesses. The CBRC's effort to boost lending to small businesses is part of the State's plan to support As in other transitional economies, Another major reason is that Chinese banks still focus on big clients, who normally bring more interest income at lower lending costs. "The trend of loan concentration on big businesses is still noticeable, which brings risk concentration as well," Wang said. The official said local banks need to pay more attention to small businesses, which is "a huge potential market for profit growth." The commission is urging commercial banks to take measures to boost lending to small businesses. These include improving the ability to separate cost calculations for small business lending from other lending operations, streamlining lending procedures, and building a database for loan defaults. Some smaller banks have shown an interest in lending to small businesses, although many are also attempting to compete with bigger lenders for large corporate clients. The Bank of Beijing announced over the weekend that it would lend 70 percent of its loans to small and medium-sized enterprises (SMEs) in the next couple of years, with 4-6 billion yuan (US$493-740 million) going to small businesses. After 10 years of growth, the bank has more than 30 percent of the city's SMEs as clients 100,000 clients. The bank lent a total of 250 billion yuan (US$30.8 billion) to the firms in the past 10 years, it said. But problems remain. Wang said Chinese banks, after years of interest rate controls, still face technical difficulties properly pricing their loans. Largely due to a lack of historic data, it is difficult for Chinese banks to properly measure the possibility of default on small business loans as well as the extent of subsequent losses, which are necessary to decide the amount of risk provisions needed for such loans. Outstanding loans to small businesses at major Chinese banks stood at 2.7 trillion yuan (US$333 billion) at the end of September, accounting for 17 percent of total lending, CBRC figures indicated. (
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