China Targets Credit Guarantee Firms
To help cash-thirsty private firms get bank loans, China, with banks in a campaign has cleaned up a host of financing guarantee firms that link small borrowers. About 75 percent of 8,732 financing guarantee firms were found to be “qualified” to run their businesses under present rules as of the end of May, the China Banking Regulatory Commission said in a statement following a series of checks and screenings.
The regulator has encouraged banks to team up with qualified credit guarantee companies and shut firms that fell of rules. By smoothing their access to lending, Chinese authorities hope to ease the burden of rising financial costs on medium- and small-sized companies by tightening regulation on the previously unruly sector. In the past year, Beijing unveiled a series of interest rate rises and credit restrictions to tackle quickening inflation deprived many small firms of loans.
For companies that would be otherwise turned away by banks, credit guarantee firms can improve the situation by vouching. The bank regulator said in the end of 2010, China has 6,030 credit guarantee firms with an average registered capital base of 75 million Yuan. In the end of 2010, they guaranteed 1.15 trillion Yuan worth of loans and credit together.