Premier Li Keqiang helps a girl paint her ceramic piece in a workshop in Hangzhou, Zhejiang province, on Nov 21.[Photo by Liu Zhen/China News Service]
Premier Li Keqiang pledged to use differentiated policies, especially loan-to-deposit ratios, to help private banks alleviate the financing woes of small companies.
Li said policy variations are necessary and fair, since small banks have fewer resources than big lenders, and most of their clients are small and startup businesses that are the fundamental providers of diversified products and jobs.
He made the remarks during a visit to Zhejiang Tailong Commercial Bank in Hangzhou, Zhejiang province, on Nov 21.
The bank, established in June 1993 and headquartered in Taizhou, Zhejiang province, is a commercial bank dedicated to financial services for small enterprises. Ninety percent of its loans are below 500,000 yuan ($81,650).
“We must support small private banks. They are the ones closely connected with small and micro businesses and are more vulnerable than big lenders,” Li said.
It is the second time in a week that Li has addressed the funding difficulties of small businesses.
A meeting on Nov 19 produced a list of measures, including flexibility in loan-to-deposit ratios, to ease financing. It also said performance assessments of Chinese commercial banks should be improved to curb the tendency to prefer big projects and high loan interest rates.
China has a loan-to-deposit ratio of 75 percent for commercial banks. Calls for a wider interest cut are also mounting on the market to ease the current liquidity shortage.
The government should guide small and medium-sized banks to further engage in local business services, and encourage them to better serve regional small and micro businesses, said Wang Jun, senior economist at the China Center for International Economic Exchanges.