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China encourages banks to grant more loans

(Xinhua)
Updated: 2008-12-03 22:31

China's State Council, or the Cabinet, said Wednesday it would adopt more favorable policies and update the financial system so as to encourage the country's commercial banks to grant more loans to support economic growth.

At an executive meeting presided over by Premier Wen Jiabao, the Cabinet also said measures should be taken to raise the country's ability to ward against risks among financial institutions.

Banks, security firms and insurers should be used in a combined way to expand financing and control risks, so that the financial sector would play a better role in supporting economic growth and contributing to industrial restructuring, it said.

Related readings:  SMEs and banks at loggerheads over loans  ABC moves to the forefront in lending  CCB to ramp up lending to aid Chinese economy  Insurers to finance infrastructure projects

In the face of the global financial crisis, it was imperative to implement a pro-active fiscal policy and a moderately easy monetary policy, and the financial sector should enhance its role in economic development.

The meeting said nine measures would be taken to boost the role of the financial sector.

First, the Cabinet said the government would use such tools as the reserve requirement ratio, interest rates and exchange rates to ensure adequate liquidity for the banking sector. In addition, an extra 100 billion yuan ($14.6 billion) of credit volume for 2008 would be given to the country's three policy banks, namely China Development Bank, China Export and Import Bank and China Agricultural Development Bank.

The second measure was aimed to improve the credit service of commercial banks to meet the demand for loans among medium- and small-sized enterprises, investors in the countryside as well as consumers such as house and car buyers.

Other measures included speeding up construction of a stronger capital market, updating methods of financing, improving the management of foreign exchange, using fiscal funds to help the financial sector reduce bad assets, and deepening financial reform to better monitor potential risks.