Policies expected to help
Following the Premier's visit to Wenzhou, policies to rescue SMEs from crisis would emerge, said economist Ma Jinlong.
But it is unlikely future monetary policy will be comprehensively relaxed. Premier Wen stressed again the government would firmly stick to its stable monetary policy to fight inflation. This means policies specifically targeting the private market will be adopted.
"Specific policy measures will be more effective in solving problems," said Zhu Boyang, an analyst with the CICC. "The China Banking Regulatory Commission has adopted policies to encourage financial institutions to lend to SMEs."
For example, the risk weight of loans for small enterprises declined from 100% to 75%, and the tolerance for non-performing loans rose to 5%.
"For a long time, private loans have lacked legal protection and status," said Mao Yushi, co-founder of the Unirule Institute of Economics. "It is necessary to regulate the market but the market cannot be eliminated."
Experts have called for China's banks to provide better services for SMEs for decades, but the provision of finance for SMEs has not improved, Mao said. The reason is different banks serve different types of clients: that is, large banks are dedicated to large enterprises, while small banks focus on small ones. In the U.S., between 7,000 to 8,000 small community banks serve small enterprises. So far, China has not legalized the registration of small private banks which, Mao says, is the only solution to solving the SMEs' financial crisis.
