China’s State Council said it intends to crack down on illegal practices in the informal financing channels that are often used by cash-starved private enterprises, the Wall Street Journal reported. Difficulty obtaining loans from state-owned banks has forced small- and medium-sized enterprises (SMEs) to turn to so-called “shadow lenders,” many of which get their funding from banks themselves, as well as property developers, coal miners and cash-rich individuals. Beijing is worried that some of the lenders’ practices, including exorbitant interest rates and pyramid schemes, will exacerbate bankruptcies among SMEs. However, analysts say that a crackdown also risks depriving the private sector of a critical source of credit. In response, the State Council has unveilied measures aimed at increasing funding to small businesses through conventional channels, and reiterated that smaller banks will be allowed to maintain lower reserve requirement ratios, making it easier for them to lend. Chinese SMEs account for 80% of the country’s jobs and more than half of its economic output, according to some estimates.