B2B Payments

SMB Lending Crunch Hits China

Small businesses (SMBs) in China are struggling to access bank loans with large, state-owned corporations, according to recent analysis from French trade credit insurer Coface, reported CNBC. That, combined with ballooning debt and ongoing trade disputes with the U.S., has small businesses “scrambling to access financial resources to meet their working capital and long-term expansion needs,” Coface said in its report.

The squeeze is not helping the Chinese economy, with small businesses often playing vital roles in connecting China to the global supply chain.

National economic policy has China cracking down on its shadow banking market, which has also exacerbated small businesses’ struggle to access financing, analysts said. According to Coface’s Asia-Pacific Economist Carlos Casanova, China should consider easing interest rate caps that discourage banks from lending to small businesses. Doing so could help lenders strike “the right balance between risk and reward,” said Casanova.

In an interview with the publication, Noah Holdings’ Chief Investment Officer William Ma said there are too few channels through which SMBs in the country can access financing. Reports noted that Chinese authorities have acknowledged the issue in previous statements.

“We must pay high attention to the difficulties faced by micro-, small- and medium-sized enterprises, and roll out precise and effective measures to help them,” said China’s Vice Premier Liu He last month.

Earlier this month, China’s President Xi Jinping met with non-state-owned companies and vowed to introduce measures to support their businesses, including the broadening of access to financing. However, analysts said these initiatives are likely to take some time to make an impact on the SMB community.

Noah Holdings’ Ma called Xi’s efforts “a game-changer,” sending a high-profile signal of support to small businesses.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.