PREMIER Li Keqiang on Friday urged banks to do more to support the real economy, as authorities grow frustrated with their reluctance to lend for productive investment, even as they support a debt-fuelled stock market rally.

    On visits to major State-owned banks, the Industrial and Commercial Bank of China Ltd. (ICBC) and China Development Bank (CDB), Li urged more lending to small and medium-sized enterprises, the government said on its website.

    “China’s economic growth is within a reasonable range, but downward pressure is increasing,” Li was quoted as saying.

    To cope with the pressure on economic growth, China will set prudent and “flexible” monetary policy and increase its “targeted” policy easing, Li said.

    China’s banks made 1.18 trillion yuan (US$190 billion) of new loans in March, beating expectations as authorities ramped up efforts to support the economy, even though data suggests credit has not yet flowed into key sectors.

    As Chinese banks become more profit-oriented, experts say they seem less interested in supporting policy goals with high risk, low returns, or both.

    The government wants banks to lend more to smaller private firms that drive the bulk of growth, but bankers say they run a higher risk of default than State-owned giants, given endemic book-cooking.

    Banks have also resisted orders to channel more credit to the cash-starved farm sector, which employs almost a third of China’s 1.4 billion people, because farmers have little collateral.

    And they have proven reluctant to resume lending for real estate, a major economic driver of demand that has been on the slide for months. (SD-Agencies)