China's cabinet calls for easier access to credit for small firms

PUBLISHED : Tuesday, 16 July, 2013, 12:00am
UPDATED : Tuesday, 16 July, 2013, 5:15am

The State Council has called for more financial support for small- and micro-sized enterprises hit hard by the liquidity crunch and a slowdown in trade.

The central government and the State Council, are giving increased attention to financial services for small enterprises, while Premier Li Keqiang had also vowed support, Vice-Premier Ma Kai told a video and telephone conference yesterday.

Officials from the People's Bank of China (PBOC) and the country's banking, insurance and securities regulators attended the conference.

The central bank should play a guiding role in supporting the refinancing of those small- and micro-sized enterprises and continue to adopt lower reserve requirement ratios for small- and medium-sized financial institutions, Ma said.

The China Banking Regulatory Commission should do detailed assessments of banks' lending to small- and micro-sized enterprises, while banks should retain enough liquidity for lending to micro businesses, he said.

Although lending to micro businesses had been growing faster than banks' total lending over the past four years, Ma said: "Financial services are still unable to meet the needs of those small- and micro-sized enterprises."

Small- and micro-sized enterprises created 80 per cent of the country's job opportunities and accounted for 60 per cent of gross domestic product and 50 per cent of tax. But lending to these micro businesses was only 20 per cent of the country's total loans, Ma added.

The video conference reflected government concerns over the liquidity problems faced by micro businesses that were the first to suffer from any economic slowdown, said Raymond Yeung Yu-ting, a senior economist at ANZ Banking.

"Many micro businesses are export-oriented and they are hit hard by the decline in trade."

Yeung said that the liquidity in the money market was adequate but that banks would rather extend loans to large or state-owned enterprises than lend money to micro businesses.

"If these small- and micro-sized enterprises turn to seeking loans from shadow banking, or even underground banks, it will pose a high risk to the banking system," he said.

Central bank governor Zhou Xiaochuan said at yesterday's conference that the PBOC would, while maintaining a prudent monetary policy, support the development of financing tools in an effort to broaden small- and micro-sized enterprises' financing channels.

Zhou said the central bank would promote the building of a credit system so that banks could better assess the creditworthiness of small firms.