MNI POLICY: China Plans New Measures To Boost Lending To Firms

By Iris Ouyang

     BEIJING(MNI) - Chinese authorities are working on further measures to boost

lending from banks and insurers to private companies, including reserve ratio

requirement cuts, tax incentives, and reductions in collateral requirements, but

financial supervision standards will not be loosened, the China Banking and

Insurance Regulatory Commission said on Tuesday.

     "Tackling the financing difficulties of small companies can't rely on

relaxing criteria for lending," Wang Zhaoxing, vice chairman of the CBIRC, told

a press conference in Beijing. "While we are increasing support for private

companies ... we need at the same time to better improve our risk management,

not to loosen risk management or lower credit criteria because that could create

financial risks and threats to our economy and financial safety."

     He said the commission will enact targeted measures, including RRR cuts and

guiding banks to reduce reliance on collaterals and guarantees from small and

micro businesses, as well as to simplify and speed up lending procedures. The

Commission will also work with the fiscal regulator on tax incentives for banks

to lend to small business.

     The CBIRC plans shortly to issue guidance urging lenders to boost the

number and volume of loans to small and micro enterprises this year compared to

last, Wang said, adding that banks should keep interest rates within reasonable

ranges, lend for longer terms and refrain from withdrawing loans to solvent

small firms temporarily experiencing operational difficulties.

     --LENDING RATES EASE

     The average interest rate charged to small and micro businesses by the 18

main commercial banks was 6.23% in the first three quarters of the year, 0.7

percentage point down from the first quarter, Wang said.

     Insurance companies will also be encouraged to increase portfolio

investments in private companies, and to provide them with insurance, thus

making them more attractive to lenders, as well as financial support, he said.

     Chinese authorities and financial institutions will continue to offer

financial services and support to companies impacted by U.S. trade measures, so

long as their products are competitive, he said.

     "Our banks have many tools to avoid foreign exchange rate risks and

interest rate risks, and we will also help companies to prevent such risks,"

Wang stressed, adding that companies should for their part improve management

and innovation.

     Wang pointed out that some firms have run into financing difficulties as a

result of highly-leveraged over-expansion at home and abroad.

     "When the global markets turned, their chains of capital broke down,

causing bond defaults and financial risks," Wang said.

     Private companies should focus on their core businesses, and also make

efforts to restructure and upgrade, Wang added.

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

[TOPICS: M$A$$$,M$Q$$$]