China’s renewed focus on curbing financial risks may have the unintended consequence of making life tougher for small companies, a key engine of job growth that the government has sought to promote, according to Bloomberg.
The government has been cracking down on any funding channels that fuel speculation or asset bubbles since the start of 2017, with the tightening set to intensify this year. This has helped the country use credit more efficiently, but it has also made it more difficult for smaller businesses to find funding. Official manufacturing figures show that the gap between small and large enterprises has been growing since mid-2017, Bloomberg says.
“Containing financial risks will remain a top priority this year, so credit conditions of smaller firms won’t improve fundamentally-unless regulators roll out more targeted policies to help,” Shen Lan, economist at Standard Chartered Plc, told Bloomberg. “Lending to smaller companies is the first to be squeezed.”