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Time to ease bank rules

(China Daily)
Updated: 2008-08-11 08:51

This country does not lack banks to provide financing to small and medium-sized enterprises (SMEs), what it lacks are measures to ease market access controls, says an article in Beijing News. The following is an excerpt:

The National Development and Reform Commission is considering establishing a bank to specialize in lending to SMEs in an effort to broaden their sources of finance, especially at this time of tightened monetary policy.

SMEs' difficulties in getting loans have long existed. Efficient measures, however, have failed to be taken, and these difficulties are increasingly jeopardizing their business. In such circumstances, establishing an exclusive bank will be of great help, but it is not enough.

The key issue is whether existing market access controls, which shield commercial banks (mainly domestic) from fierce competition and thus make them reluctant to introduce innovative services, can be lifted.

In the United States, except for large international banking groups, there are tens of thousands of small community banks competing fiercely with each other. They use every means to win customers. But in comparison, there are few such banks in China.

What is encouraging is the few medium and small banks that have appeared in recent years are showing competition-driven vitality, especially those in provinces with well-developed economies such as Zhejiang.

The Bank of Ningbo is an example. It focuses on SMEs as its key clients despite the belief SMEs show low profits and banks are subject to high risk.

Results show otherwise. At the end of the first quarter, the profit level of the Ningbo Bank is quite good while the non-performing ratio of the bank was only 0.35 percent.