Chinese Central Bank Wants Long-term Mechanisms for Driving Loans to Small Businesses

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The People’s Bank of China (PBOC) has issued a new directive to help drive increased lending to the country’s small enterprises.

PBOC recently issued the “Notice on Driving the Establishment of Long-term Mechanisms for Financial Services for Micro-and-Small Enterprises, and Daring to Loan, Willingness to Loan and Ability to Loan” (关于推动建立金融服务小微企业敢贷愿贷能贷会贷长效机制的通知).

The Notice calls for “further deepening supply-side structural reforms for micro and small-enterprise financial services; accelerating the establishment of long-term effective mechanisms, striving to increase the willingness, capability and sustainability of financial institutions servicing micro-and-small enterprises, and helping to stabilise market entities, stabilise employment and entrepreneurship, and stabilise economic growth.”

Key measures outlined by the Notice include:

  • Improving fault tolerance arrangements and sustained risk alleviation mechanisms.
  • Strengthening confidence in daring to loan.
  • Banking sector financial institutions confirming standards and procedures internally for objective, quantitative and convenient due diligence.
  • Accelerating the establishment of full-procedural risk control and risk management systems.
  • Increasing mechanisms for the identification, early warning and disposal of micro-and-small enterprise loan risk.
  • Effectively implementing regulatory requirements for the tolerance of non-performing financial inclusion micro-and-small loans.