Date 17 February 2012
Early February the State Council announced China’s aim to decrease regulatory limitations in the areas of private and foreign capital. Major reason for easing this policy are the financing difficulties which small and medium sized domestic companies face since the country’s banks have a tendency to only lend to larger companies and state-owned enterprises. Therefore encouraging small foreign financial institutions to supply small loans is seen a measure to compensate for the high degree of risk avoidance of domestic banks.
Following the announcement of the State Council, last Monday Shanghai’s financial authority stated it would pursue foreign financial institutions to establish financing branches in the city, which shows its ambition of becoming a global financial centre. There is expected to be abundant demand for loan companies in the city because weak foreign markets and tight monetary policies have put small and medium sized companies under increased pressure. According to the Shanghai Municipal Office of Finance Service several overseas investors have already expressed serious interest in opening financing branches in the city.
The small and medium sized firms in China represent a dominant part of the world’s second largest economy. Most of the job creation and government tax income is driven by the small and medium sized enterprises. This is very likely the reason for the government to concentrate on this matter to ensure sustainable growth of China’s economic development.
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