Trade war tightens credit for China’s small businesses, regulator warns
- Lenders still a ‘long way’ from solving the problem of bank credit access for small firms
The credit squeeze hitting Chinese small and medium-sized businesses is being exacerbated by the trade war with the United States, according to China’s insurance and banking regulator.
In recent weeks, Beijing has announced a series of measures to support the private sector as increasing numbers of smaller export firms both struggle to get access to credit and risk losing orders due to the trade war.
China’s economy is growing at its slowest pace in a decade and it is likely to slow further as the trade war with the US escalates. Corporate bond defaults are at a record high this year amid falling profits and rising financing costs.
The Financial Stability and Development Committee – the country’s highest decision-making body for economic and financial policies, headed by top presidential economic adviser Vice-Premier Liu He – has given specific orders on what Chinese banks, mostly owned by the central or local governments, should do to boost credit support to private businesses.
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Private firms, which usually do not qualify for traditional bank loans, have struggled to get financing since the government’s campaign to eliminate shadow banking cut off the only source of credit for many firms.
