A senior figure at Bank of China, the state-run commercial bank, has contradicted the pessimistic sentiment surrounding the financing environment for private firms in China by suggesting that the government’s easing policies are already taking effect, Bloomberg reports.
Liu Donghai, general manager of Bank of China’s investment banking and asset management department, said in an interview in Beijing that he expects the number of private sector debt defaults to decrease in 2019 thanks to the government’s increasing support for the real economy.
The private sector has borne the brunt of Beijing’s efforts to rein in risks in the financial sector this year, as the tighter credit conditions have led banks to lend mainly to state-owned enterprises, which are considered less risky borrowers than private firms.
However, the government has introduced several measures designed to help struggling private firms. The People’s Bank of China will lend $1.4 billion to provide credit support for private company bond sales. Local governments including Shanghai are also setting up their own funds to offer support to local listed companies.
Not everyone agrees with Liu’s rosy assessment, according to Bloomberg. Sun Binbin, an analyst at TF Securities, warned investors not to invest in private companies until they were sure the changes would make a difference, rather than simply favoring industrial and regional champions.