Chinese banking regulator allows higher bad-loan ratio for small firms

China's banking regulator said Wednesday that it will tolerate a higher ratio of bad loans to small businesses as part of the effort to tackle financing difficulties of the real economy.

The non-performing ratio of inclusive loans to small and micro companies will be allowed to reach a level no more than 3 percentage points above the overall ratio this year, the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement.

The precondition for the easing is that the risk in such lending remains largely controllable.

Apart from the higher NPL ratio, the CBIRC listed several other goals for loans to small firms in 2019, including steady growth and reasonable interest rates.

Five large lenders should play a leading role, the CBIRC said, noting that their outstanding loans to small firms in total should rise by more than 30 percent this year.

The move came amid government efforts to finance the real economy and help small firms weather out economic hardship amid lingering downward pressure.

At the end of last year, outstanding inclusive loans to small and micro firms amounted to 9.36 trillion yuan (1.39 trillion U.S. dollars), up 21.79 percent from the beginning of 2018, which was 9.2 percentage points faster than the overall lending growth.