China: Here Comes The Rescue For Bosses Trying To Run Away (Or Is it?)13 October, 2011, 2:18. Posted by Zarathustra
Tags: Banks, Economy, Small and Medium Sized Businesses
So after some concerns and worries, the Chinese government respond with some measures to try to save the problem with small and medium sized businesses having difficulties getting financing, or, the problem of how to stop the crazy bosses from running away because they have borrowed from loan sharks as a result of being thrown away from banks’ branch (okay, that was a joke).
Premier Wen Jiabao had meetings in the State Council, and the State Council is announcing 6 measures to support small businesses.
The more important 4 points of the 6 are:
Increase small businesses’ access to credit from banks, with growth of credit to small businesses not lower than the overall loan growth
Banks should scrap unreasonable fees charge to small businesses to reduce costs of running small businesses
Explore more channels for small businesses to obtain credit.
Refine differential regulatory structure for small businesses. Loans of the size below CNY5 million could be excluded in the calculation of of loan-to-deposit ratio, and would allow banks to use the same risk-weighting as retail loans.
The State Council is also raise the the entry point for some taxes for small businesses and reduce some stamp duties, etc.
On the whole, policymakers seem to be aware of the problem (of course they are). But these measures aren’t really that dramatic against the backdrop of a tightening cycle. Also the it does not sound like a very good idea to reduce the risk-weighting of SME loans, which are more risky. I am already very pessimistic about Chinese banks, and I am sure that there is room to be even more bearish on banks if policymakers think that it is a good idea to start lending indiscriminately again.
On the whole, I am not convinced that these will help a great deal.