China Lays Out Banks' Lending Targets for Private Companies

(Bloomberg) -- China aims to boost large banks’ loans to private companies to at least one-third of new corporate lending, said Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission. Shares of lenders retreat on the mainland and in Hong Kong.

Key Insights

  • Guo’s comments are the latest attempt by authorities to try to improve funding access for China’s non-state companies, which often struggle to get bank loans
  • It’s the first time financial regulators have given targets on private lending, a reflection that earlier efforts haven’t triggered the necessary credit activity
  • Policy makers need to make sure that China’s private firms -- who already face challenges taking on state-owned behemoths -- survive amid a plunging stock market, record corporate defaults and a cooling economy
  • It will likely increase market concern on banks’ "civic duty" and potential increase in NPL ratio amid economic slowdown, and negative for short-term sentiment: Huatai

Digging Deeper

  • The target for small and medium-sized banks is higher, at two-thirds of new corporate loans, Guo said in an interview with Financial News
  • Guo wants to see loans to private companies account for at least half of total new corporate loans in three years
  • Banks’ loans to non-state companies accounted for less than a fourth of total loans as of end-Sept

Markets

  • China Construction Bank retreats 2% as lenders are among biggest drags on Hang Seng Index on Friday; HSBC -1.2%, ICBC -2.6%, Bank of China -2%, China Merchants Bank -4.9%
  • On mainland, Bank of Shanghai -4%, China Merchants Bank -4%, ICBC -3.3%, Agricultural Bank of China -2.9%, Industrial Bank -2.5%, Bank of China -1.6%, Bank of Communications -1.3%

Get More
  • Remarks follows seminar for private companies hosted by President Xi Jinping on Nov. 1

To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net

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