China's banking watchdog is urging banks to use up their lending quota this year in favor of small and medium sized companies in a move to push up the volume of loans to SMEs. The regulator is also asking that the growth in loans to smaller companies be higher than average growth for loans to all sectors.

In addition, China's banking watchdog is urging lenders to charge preferential interest rates to SMEs and set up separate standards and procedures to evaluate lending to small businesses. According to the top economic planner, more than 67 thousand SMEs have shut down in the first half of this year alone, with funding still a serious problem. And despite the government pushing for credit initiatives to SMEs over the last few years, lending to this sector remains minimal. But just last month saw the central bank make another move to help finance small and medium sized enterprises. It pushed up national bank lending quotas by 5 percent for the year.

While for regional lenders, the quota has gone up by 10 percent to help finance SMEs in more rural areas.

(CCTV August 30, 2008)