Chinese banks' small business loans up 17% in Q1 as stimulus kicks in

Banks achieved 55% of their annual targets for small companies.

Outstanding loans extended by China’s big five state lenders rose 17% or to $295.7b (RMB1.99t) as of end March compared to the end of 2018, in a development indicating how banks are heeding calls from regulators to lend more to support credit-starved firms as reported by Reuters.

The growth rate of the banks’ small business lending outpaced the average loan growth rate by 12.4 ppt, Zhu Shumin, vice chairman of the China Banking and Insurance Regulatory Commission (CBIRC) said. Moreover, the borrowing cost for small businesses dropped, with the banking sector’s average interest rate for such loans dipping to 6.87% in Q1 from 7.39% in 2018.

Also read: Can Chinese banks plug SMEs gaping credit crunch?

According to Zhu, the biggest banks achieved 55% of their annual targets for small companies by end-March and accounting for a fifth of total small business lending, adding that the average interest rate was as low as 4.76%, down 0.13 ppt from Q4 2018.

Beijing is pushing the Big Five to boost lending to small businesses by at least 30% in 2019 in an effort to prop up firms hit hard by the deleveraging and economic slowdown although this could come at the expense of their asset quality.

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