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        Private investors expected to found financial organs

        By Wang Xiaotian (chinadaily.com.cn) Updated: 2012-11-03 09:06

        The Chinese government is preparing to lift barriers preventing private investors from setting up small financial institutions, in a bid to improve credit support to small businesses.

        Pan Gongsheng, deputy governor of the central bank, said on Thursday that it's important to accelerate the development of small financial institutions, which will really focus on providing support to small businesses, and explore paths for private investors those institutions.

        According to Pan, by the end of September, outstanding loans to small businesses surged to 12.3 trillion yuan ($1.95 trillion) from the 4.4 trillion yuan by the end of March, accounting for 29 percent of total loans to corporates.

        In the first nine months, one-third of new loans extended to industrial companies went to small businesses, while nearly 40 percent of new loans to the services sector also went to small companies.

        However, according to a survey conducted by the All-China Federation of Industry & Commerce earlier this year, 90 percent of Chinese small enterprises never managed to get loans from financial institutions.

        The federation has suggested that regulators abolish rules stating that only commercial lenders can establish rural banks.

        "International and domestic practices have demonstrated that financing from major lenders cannot meet the demand of small enterprises. We need to develop micro financial institutions," Pan said.

        He said that the establishment of a deposit insurance system should be established, and some players should exit the market orderly if they cannot perform well enough.

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