Corporate debt in China is on the rise, with nonperforming loans presenting worrying growth in the market. But, earlier this year, the nation surprisingly showed an uptick in small business lending, as reported by the central bank.
The data followed an order by the China Banking Regulatory Commission (CBRC) for financial institutions to increase their lending to SMEs as economic growth slows.
It may be good news but not enough for the CBRC.
Reports on Monday (May 16) said unnamed sources have told reporters that the banking regulator is now telling banks to boost lending to private companies. Documents seen by Reuters also suggest that the CBRC is asking these financial institutions to review their adherence to government directives aimed at boosting financing to the private sector, reports said.
The companies have only a few days to report back on their efforts to implement those directives, reports added.
Private company investment increased by just 5.7 percent in the first quarter of the year, a significantly lower growth rate than the same time a year prior. It also compares to the 23.3 percent increase in investment in the private sector during that quarter.
To give the market a boost, officials are reportedly calling on banks to not only increase their private sector lending but to also introduce a broader range of loan products, including short-term solutions, like bridge loans.
As regulators look to boost corporate bank lending, the latest data suggests a significant rise in nonperforming loans among corporate borrowers in the country.
Reports earlier this month found NPL levels reached their highest levels in 10 years in 2015. There is now more than $614 billion worth of nonperforming loans, analysts found.
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