The People's Bank of China is considering plans to allow commercial banks to issue loans for mergers and acquisitions, the 21st Century Business Herald reported. The newspaper, citing sources, said the central bank and the industry watchdog, the China Banking Regulatory Commission, were each conducting their own feasibility studies. The press office of the PBOC refused to comment on the report. But analysts suggested that a gradual economic slowdown on the mainland and a decline in many industries would present various M&A opportunities and a new source of revenue for banks. 'The adjustments taking place in a lot of industries are going to create many M&A opportunities, which, if commercial banks are permitted to enter, will be an influential area for commercial bank operations,' said China Galaxy Securities banking analyst Zhang Xi. JP Morgan Asia Securities analyst Samuel Chen agreed, saying the appearance of the proposal was an indication of Beijing's plans to boost industrial consolidation. The mainland economy expanded 10.1 per cent year on year in the second quarter, compared with 10.6 per cent in the first quarter, the slowest rate since the last three months of 2005. Some analysts have tipped economic growth to slip to 9 per cent or lower in the fourth quarter. Ms Zhang said the market-oriented transformation of major state-owned commercial banks had also helped the banking sector mature sufficiently to deal with M&A lending, widely considered a high-risk area. Domestic commercial banks already have access to M&As through their investment banking arms. This would eventually draw them into M&A lending activity because competitive forces were propelling banks to offer across-the-board services rather than just financial consulting for M&A deals, analysts said. Domestic banks also complain that they are at a disadvantage in the mainland market as foreign banks are permitted to offer M&A lending. But BNP Paribas Peregrine analyst Dorris Chen said the new policy, if adopted, would have limited impact on banks. 'M&A lending is a high-risk area, which puts considerable demand on commercial banks' risk management skills and their professional expertise,' Ms Chen said. 'Commercial banks won't rush into the business even if the policy is approved.'