China's Banks Told to Boost Loans to Small Businesses

Chinese financial firms should make support for small and medium-sized businesses a priority in 2009, and ensure that loan growth to such firms exceeds overall loan growth, the country's banking regulator said, according to a report on Xinhua on Wednesday.

The statement comes after the China Banking Regulatory Commission posted a 10-point plan earlier this month urging banks to increase lending to help finance the government's 4 trillion yuan ($585 billion) economic stimulus package.

In current turbulent times, financial institutions must recognize the important role played by small businesses (SME) in creating jobs and improving living standards, Xinhua quoted Liu Mingkang, the chairman of the CBRC, as saying.

Chinese SMEs have long complained about the difficulty of securing credit from banks, which favor the lower risk of lending to large state-owned companies.

More From CNBC.com

• Pros Say: Potential Rebound in China this Quarter
• China's Economy May Recover by Q1
• Charting Asia: A Bull in the China Market
• More Asia Pacific News

The statement did not provide any details, but the government's massive efforts to jump start the economy are already paying off.

Banks made 772 billion yuan ($113 billion) in new yuan loans in December, up 62 percent from November after the central bank scrapped loan quotas and urged banks to lend more to support growth. Economists say new loans in January could reach 1 trillion yuan.

China's economic growth cooled to 6.8 percent last quarter amid a global slowdown, dragging down the pace of expansion for all of 2008 to a seven-year low of 9.0 percent.

The bank regulator had earlier encouraged banks to lend more to farmers and to sound companies facing temporary financial or operational difficulties due to the global downturn.

Copyright 2009 Reuters. Click for restrictions.