China may be in the midst of a struggle to reign in nonperforming corporate loans, but that doesn’t mean its banks have held back. Reports on Thursday (April 21) said China’s financial institutions boosted small business lending by 14.5 percent in March.
The data, released by the central bank, revealed $2.8 trillion lent to the country’s small businesses that month, a 14.5 percent increase year over year. That growth rate surpassed those of lending to mid-sized and large corporates, reports said.
Small business loans also accounted for nearly a third of all loans issued by China’s banks by the end of March.
The spike is likely the result of political pressure on FIs to boost small business support.
Last year, the China Banking Regulatory Commission reportedly ordered top banks in the country to increase their SME lending volume to help support an economy recently hit by slowing growth. The economy grew at 7.4 percent in 2014, its slowest rate in two decades.
Data from 2014 said Chinese banks lent 24 percent of their business financing to small companies that year.
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Regulation has emerged to stem the bleeding from bad corporate debt, with reports last month revealing that nonperforming loans in the country hit a 10-year high in 2015. Banks had more than $614 billion in bad corporate debt on their books, reports added.
Unnamed sources told reporters that Chinese officials were exploring regulation that would allow banks to sell their outstanding NPLs in exchange for stakes in the companies that borrowed from them.
