Bloomberg News

Shanghai to Set Up $469 Million Funds for Smaller Companies (1)

September 06, 2011

(Updates with details of the fund from fourth paragraph.)

Sept. 6 (Bloomberg) -- Shanghai will set up three funds with combined assets of 3 billion yuan ($469 million) to support small- and medium-sized enterprises, as the nation’s monetary tightening restricts their funding access.

The local authorities also aim to increase the number of small-loan companies to 100 from the current 69, with a target of boosting loans to about 35 billion yuan annually, the municipal government said in a statement today.

China’s small businesses are facing higher energy, raw material and labor prices. Funding costs are rising with government measures to curb accelerating inflation, the central bank said last month.

Only 10 percent of small companies in Shanghai, the nation’s financial hub, had bank loans as of June 30, according to Liao Min, head of the China Banking Regulatory Commission’s local bureau.

Shanghai will set up a 1 billion yuan fund to invest in financing-guarantee companies to boost their ability to help small companies obtain bank credits, according to today’s statement. The city will set up another two funds of the same size to share lenders’ potential bad-loan losses in financing high-tech start-ups or invest in local small and medium-sized businesses to help their development.

The city will also pay for accounting services if both small-company borrowers and banks agree to ensure the reliability of the financial data, according to the statement posted on the local government’s website.

Total bank lending to small companies in Shanghai rose 9 percent from end of last year to 651.9 billion yuan as of July 31, 1.4 percentage points faster than the city’s overall loan growth, Liao said in the statement.

Only a small number of small businesses have shut down this year, the People’s Bank of China said in its second-quarter monetary policy report released on Aug. 10.

--Zhang Dingmin. Editors: Chua Kong Ho, Anand Krishnamoorthy.

To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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