China’s small and medium-sized enterprises (SMEs) may be facing a new credit crunch as the country’s five big State-owned banks come under further financial pressure.
Timothy Beardson, a leading Asian banking expert and author of Stumbling Giant: The Threats to China’s Future, believes banks should possibly be forced to operate under a quota system to increase small business lending. Currently only one in five loans goes to SMEs.
“This means the banks should receive instructions to deliberately lend more to private companies, perhaps through quotas,” he argues. “Private companies should not be charged higher interest rates than State-owned enterprises. Let’s tell the banks it is their job to fund China’s future, not its past.”