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Loan to Small Companies Encouraged

The China Banking Regulatory Commission will soon release guidelines on lending to small businesses, the banking industry watchdog said in a statement yesterday on its website.

The new guideline will encourage lending, and push forward product innovations and risk control improvements, according to the statement.

Release of the long-awaited guidelines will enhance government support for the development of China's small and medium-sized enterprises (SMEs), industry analysts said.

However, "its impact is likely to be limited," as banks who are interested in doing such business are already doing so, Yi Xianrong, a financial expert with the Chinese Academy of Social Sciences, told China Daily yesterday.

He said the most important thing was for banks to establish a risk-based pricing system now the central bank has removed the ceiling on interest rates.

In China, SMEs contribute about 60 percent of the country's gross domestic product and 60 percent of exports. They employ 75 percent of the nation's workers, according to statistics from the National Development and Reform Commission.

However, "less than 30 percent of their financing demands are satisfied," said Crystal Qian, head of corporate affairs with Standard Chartered in China.

Lending to SMEs is a long-term strategy of her bank in China.

"The guidelines will give us more support," Qian added. "It will help the market grow."

In recent years, more banks have lent to SMEs, due partly to the increasing difficulty of securing big corporate clients.

(China Daily July 22, 2005)

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