In Focus
LENDING & CREDIT | Tony Chua, China

China regulator lays down policies to aid SMEs

CBRC measure to help small businesses in some coastal areas whose condition at present is worse than during the peak of 2008 global financial crisis.

The China Banking Regulatory Commission (CBRC) on Tuesday announced a series of favorable policies for lenders to offer more loans to small-scale enterprises.

The move is designed to alleviate the financial pressure on smaller businesses against the background of the nation's monetary-tightening policies.

According to the new regulations, a lower risk weighting (25-percentage-point less) will be applied when calculating the capital-adequacy ratio for loans of less than 5 million yuan ($772,000) to each individual small enterprise.

The CBRC's move came after the country became caught between sliding industrial output and rising inflation. Analysts have said that small businesses in some coastal areas are currently in a worse situation than at the height of the global financial crisis in 2008. That's mainly because of measures such as interest rate rises and the increase in reserve requirement ratios for lenders, which are intended to soak up liquidity and combat inflation.

China's purchasing managers' index, a key gauge of manufacturing activity, hit a nine-month low of 52 in May, while the consumer price index (CPI) is forecast to come in at 5.5 percent year-on-year in the same month, the fastest pace since July 2008.

The central bank has raised interest rates four times since October, and has also increased the reserve requirement ratio for banks eight times over the same period to a record 21 percent for major lenders.

View the full story in China Daily.

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