Recently, the Chinese government lowered the loan target for this year fearing excessive lending in 2009 which could lead to asset bubble risks. Dispite the clampdown, China's banking regulator said Tuesday it would open up more credit avenues for small enterprises this year.
Small- and medium- sized enterprises always had a harder time receiving credit lines in China as commercial lenders were reticent to give loans to them due to the high risk compared to larger companies and instead preferred to lend to large State-run companies. The earlier announced credit tightening has frightened the government because small enterprises could be the first to feel stricter credit availability. Therefore, more credit lines should be available to smaller businesses to prevent a total credit shutdown.
"In order to stimulate credit lending to smaller businesses, the banking supervision department is drafting new supervision rules governing banks' small enterprise business which are likely to come out later this year," said Xiao Yanqi, director general of banking supervision department II.
Also, an increasing number of domestic mid-sized lenders, are planning to lend more to smaller businesses to fend off competition with large State-run lenders, said Xiao.
Personally I think that the earlier announced credit tightening is an essential evil to prevent a future bubble that could lead to an enormous economic disaster. But I also find it a good decision to put more credit lines available for smaller businesses. Those small businesses are a very important part of a growing industry on which a lot of people are relying.
Tom Bogaert
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