CBIRC Scrutinises Interest Rates for China’s Small and Micro-Enterprises


The China Banking and Insurance Regulatory Commission (CBIRC) has announced that it’s undertaking as well as further researching and refining specialist assessments of interest rates for loans to small and  micro-enterprises, as part of efforts to shore up Chinese financial inclusion.

Speaking at a routine meeting of the State Council Wang Zhaoxing (王兆星), vice-head of CBIRC said that initial considerations include market interest rate  and financing costs based upon real interest rates.

Wang said that the next move will be to conduct “two increase and two control” (两增两控) assessments of commercial banks, requiring that lenders ensure that the growth rate of loans to small and micro-enterprises is at least as high as the growth rate for other categories of lending, as well as that the number of small and micro-enterprise borrowers is at least as high as the same period last year.

The regulator will also conduct specialist assessments of the interest rates for “Three Agricultural” loans to small and micro-enterprises, which Wang said will be of benefiting to reducing micro-enterprise and “Thee Agricultural’ financing costs.

Li Junfeng (李均锋), chair of the financial inclusion department of CBIRC, said that the interest rate for loans made by banks to small and micro-enterprises is currently being kept within rational bounds, but that there is still room for further reductions.

The next step will be to push for banks to reduce the total borrowing costs and real interest rates for small and micro-enteprrises.

According to Li CBIRC will focus on four key areas:

  1. Reducing the cost of funds for lending by commercial banks to small and micro-enterprises.
  2. Using new technology and methods to reduce the administrative costs of loans by commercial banks to small and micro-enterprises.
  3. Actively introducing more small and micro-enterprise lending policies, to reduce the difficulty of obtaining finance.
  4. Actively pushing for reductions in ancillary fees of loans of small and micro-enterprises.

The Chinese central government is currently pushing for greater financial inclusion, with policies such as targeted required reserve ratio cuts incentivising commercial banks to lend more to small and micro-enterprises.

China’s 2018 Government Work Report calls for reform and improvement to the financial service system, support for financial institutions in the expansion of financial inclusion business, the standardised development of local small and medium-sized financial institutions, and efforts to resolve the difficulty that small and micro-enterprises experience when seeking finance.

Data from the China Banking and Insurance Regulatory Commission (CBIRC) indicates that the bank loan balance to small and micro-enterprises across China hit 31.76 trillion yuan (approx. USD$5.03 trillion) by the end of the first quarter of 2018.

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