Party time for very small companies


China’s central bank tweaked its rules on bank lending to the country’s cash-starved small businesses, the latest move to support the private sector in an economy that faces growing headwinds.

The People’s Bank of China said in a statement Wednesday that enterprises with bank credit lines less than 10 million yuan ($1.5 million) now are seen as small and micro enterprises, and bank lending to these companies, if reaching certain amount, can make lenders eligible for lower reserve requirements.

Previously, only loans to companies with less than 5 million-yuan credit lines had been seen as small and micro loans. The latest rule tweak in effect encourages bank loans to more small companies, the central bank said.

In 2017, the PBOC said the reserve-requirement ratio for Chinese banks, whose lending to small and micro companies takes up to 1.5% of their annual new loans, can be lowered by 0.5 percentage point from the benchmark requirement. Banks with more than 10% of new loans to small companies are qualified for an additional 1 percentage point reserve-requirement-ratio cut.

China’s central bank, together with other financial regulators, has stepped up support for small private companies, which contributed the bulk of national economic output but have been disproportionately hit by Beijing’s deleveraging campaign.

Hey, leverage is fun – until it isn’t.

One Response to “Party time for very small companies”

  1. feeblemind Says:

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