THE funding squeeze for China’s private enterprises is expected to persist, despite recent measures aimed at easing financing difficulties, adding further pressure on the beleaguered stock market.

Non-State companies have borne the burden of the government’s two-year deleveraging campaign, as the closing down of funding channels boosted the cost of borrowing and sent defaults to a record high.

Denied loans from mainstream banks because of a lack of collateral, the private sector — which accounts for the majority of China’s gross domestic product — has been forced to find other ways to obtain capital. These included turning to shadow banking, issuing bonds and putting up shareholdings as collateral for loans. All these avenues have become more inaccessible or costly at the same time as a trade war with the United States threatens to shrink profit margins.

“Because of the market slumps, many people think there is no collateral that’s good enough to be pledged for lending to private companies — that is fatal for such firms,” said Xia Le, Hong Kong-based chief Asia economist at Banco Bilbao Vizcaya Argentaria SA.

The People’s Bank of China plans to give 10 billion yuan (US$1.4 billion) to a State-backed insurer to provide credit support for debt sales by private enterprises, people familiar with the matter said Tuesday. That’s part of the plan the central bank announced this week to support such firms, including a 150 billion-yuan increase in financing, after the stock market’s steepest selloff since 2015.

The measures came after President Xi Jinping on Sunday vowed unwavering support for non-State companies, which represent more than 60 percent of the economy and 80 percent of employment. (SD-Agencies)