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China to boost loan support to manufacturers, small bank reforms: regulator

BEIJING (Reuters) – China will offer extra financial support to manufacturers next year, the banking and insurance regulator said on Friday, after a run of bond defaults by private firms in the sector.

The Banking and Insurance Regulatory Commission (CBIRC) has encouraged banks not to pull loans to firms facing temporarily liquidity issues, notably in the textile, clothing and paper-making sectors, and is promoting the use of creditor committees to help borrowers resolve their troubles.

But China’s banking sector is facing pressure as economic growth slows to its weakest in nearly three decades, and five regional banks have been hit with management or liquidity problems this year.

Non-performing assets of some small- and medium-sized banks are rising, curbing their lending capability, Yang Liping, chief supervision officer with the regulator, told reporters in Beijing.

Loans to manufacturers make up the largest part of that portfolio.

Yang said the process of absorbing bad loans needed time, and the situation would not improve in the short term.

“We’ll use designated approaches to resolve different problems of high-risk smaller (banking) institutions. But firstly, we need to know the real level of asset quality and then help them to increase capital,” she added to Reuters on the sidelines of the conference.

Yang said banks could issue shares or perpetual bonds to recapitalize and, longer-term, cut their investment risk and focus on their local savings and lending businesses.

In another measure to boost liquidity, authorities will push 2 trillion yuan ($285.5 billion) of new loans – partly state-funded – to small and medium-sized firms next year, according to CBIRC’s inclusive finance department head Li Junfeng.

The government has previously said lending growth to smaller firms by China’s big five banks would be no less than 20% in 2020.

Commenting on a debate between markets and watchdogs on how quickly and strictly to implement proposed tougher guidelines for once loosely regulated asset management products, the CBIRC said it would make small adjustments, without commenting on any extension period.

The CBIRC also said it was approving the country’s first wealth management joint venture with a foreign controlling shareholder. Amundi Asset Management will hold 55% of the project and Bank of China Wealth Management the rest.

It would be set up “under the current regulation framework,” said Wang Daqing, large bank department chief at the CBIRC. Other “leading and capable” foreign asset management firms were in talks with Chinese banks on setting up similar joint ventures, he said.

(Reporting by Cheng Leng, Lusha Zhang and Se Young Lee; Editing by Alison Williams and John Stonestreet)

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