China Set to Maintain Drive for More Small Business Lending in Second Half of 2021


China’s commercial banks are expected to maintain robust levels of lending to micro and small-enterprises (MSE’s) in the second half of 2021, amidst a push from authorities for greater financial inclusion.

Since the start of 2021 China’s top financial regulators have repeatedly stressed efforts to step up lending to MSE’s and individual commercial and industrial proprietors, after intensifying their financial inclusion drive during the turmoil of the COVID-19 pandemic.

These efforts have borne fruit in the form of ongoing rapid growth in credit extension to Chinese small businesses.

Figures from the China Banking and Insurance Regulatory Commission (CBIRC) indicate that as of the end of April the national MSE loan balance was 45.94 trillion yuan, including 16.9 trillion yuan in financial inclusion MSE loans, for a YoY rise of 31.8%, 19.8 percentage points ahead of overall lending growth.

The individual industrial and commercial proprietor loan balance was 5.4 trillion yuan at the end of April, for YoY growth of 27.8%, 15.8 percentage points ahead of growth in overall lending.

Domestic analysts as well as state-owned media expect lending by Chinese banks to small businesses to remain robust in the second half of 2021, with a greater emphasis upon more targeted financing.

On 25 June the Chinese central bank’s monetary policy committee called for “expanding the vigour of support for financial inclusion,” as well as “guiding financial institutions to expand support for areas including tech innovations, micro and small-enterprises and green development.”

“Compared to last year, MSE support measures this year differ in that bank loans are more targeted,” said Zeng Gang (曾刚), deputy-chair of the National Institution for Finance & Development (NIFD) to the Chinese central bank’s official news outlet.

An area of especial focus for financial inclusion measures will be those sectors impacted by the COVID-19 pandemic, such as transportation, tourism, food and beverages, accommodation, retail and import-export operations.

“From the perspective of banks servicing the real economy, we feel the those sectors that have been impacted by the pandemic are consistent with those as determined by the government, and banking and regulatory authorities,” said Li Taishun (李泰顺), general manager of the finance inclusion department of Industrial Bank Co., Ltd.

“We have adopted measures including reduced financing costs for enterprises, the use of product innovation to provide medium and long-term credit support, expansion of online lending and credit products, and strengthening of supply chain financing, to help enterprises to overcome these difficulties, and help enterprises to continue operation.’