BANKS in China have extended more loans at lower interest rates to small firms in the first quarter of the year, heeding the government’s call to support the economy, according to the country’ banking regulator.

The amount of outstanding loans to small enterprises at China’s five largest state lenders rose to 1.99 trillion yuan (US$295.7 billion) by the end of March, up 17 percent from the end of 2018, Zhu Shumin, vice chairman of the China Banking and Insurance Regulatory Commission (CBIRC), told a press conference last week.

The growth rate of their small business lending outpaced the average loan growth rate by 12.4 percentage points, Zhu said. China’s five largest banks accounted for nearly one-fifth of total small business lending in China.

Small businesses’ borrowing cost also dropped over the first quarter, Zhu said, with the banking sector’s average interest rate for such loans lowered to 6.87 percent in the first quarter industry-wide, from 7.39 percent in 2018, Zhu said.

To spur economic growth and lift market confidence, the government is pushing large banks to significantly boost lending to small businesses by at least 30 percent this year.

The biggest banks had met 55 percent of their annual targets for small companies by end-March, Zhu said, adding that the average interest rate was low as 4.76 percent, down 0.13 percentage points from the fourth quarter last year.

“If banks can control risks with a below 3 percent bad loan ratio, their interest rate should be set between 5-5.7 percent for them to stay slightly profitable and commercially sustainable,” Li Junfeng, head of the financial inclusion department of the CBIRC, told reporters at the briefing.(SD-Agencies)