The Chinese government has set a mandatory target for the country’s commercial banks to increase lending to small companies by 30%, while state-owned banks will be required to institute increases of over 30%.
Beijing’s aim is to provide more opportunities for private firms to stimulate the economy, said the South China Morning Post. Cuts in the bank reserve ratio requirement will also be enforced to encourage lending to private companies.
Chen Shujin, Chief Financial Analyst at Huatai Financial Holdings in Hong Kong, noted that currently only 2% – 6% of loans made by China’s top five banks go to small companies. She said the mandatory changes could help inject as much as RMB 1.8 trillion worth of capital into small companies.