Chinese banks are becoming more willing to extend their loan business to small domestic companies, said a report in Monday's China Youth Daily.

 

The China Construction Bank (CCB) recently established a mechanism to assess the credibility of small companies, which will facilitate the granting of loans, according to Zhu Xiaohuang, general manager of its corporate service department.

 

"For companies with transparent information release, the lending rates will be no more than 30 percent higher than the benchmark interest rate," Zhu said.

 

"But for companies with higher risk management, the lending rates will be over 50 to even 100 percent higher," he said.

 

The CCB is not the only bank showing interest in granting loans to these small-sized companies, which contribute nearly 60 percent of China's annual economic output.

 

The Industrial and Commercial Bank of China (ICBC), China Merchants Bank and Shanghai Pudong Development Bank (SPDB) are taking similar steps.

 

The SPDB plans to expand its business of small and medium-sized companies to 25 percent or more in the next three to five years.

 

For a long time, banks have been daunted by small-scale, emerging companies, which face many difficulties, such as low credibility and higher risk management.

 

Small companies are classified as those with both total assets and annual sales revenue of under 40 million yuan (roughly US$5 million).

 

(Xinhua News Agency February 7, 2006)