Chinese banks move to finance local businesses

Banks are being encouraged to stimulate China’s economic growth at the local level by lending more to local governments and business firms.

Beijing is urging commercial banks to provide funds for local projects and move away from loans to big state-owned enterprises. The government wants bank loans to go mostly to highway and railway construction, natural gas and clean energy projects and other projects related to people's well-being.

The China Banking Regulatory Commission, the banking regulator, has pledged more effective support for development China’s “real economy” in the second half of this year, including more credit support for agricultural production, infrastructure and public housing.

Beijing, however, is being asked to assist heavily indebted local government’s repay their outstanding loans by loosening credit support on provincial-level projects or key projects to prevent these projects from going unfinished.

Minister of Finance Xie Xuren vowed that China would strengthen local government debt management and strictly control new borrowing to prevent fiscal risks.