China is considering setting up a small- and medium- sized enterprise (SME) bank to help the country's myriad smaller companies overcome financing difficulties.

Sources with China National Development and Reform Commission (NDRC) revealed that the NDRC is currently joining with other government departments and organizations to discuss and study the possibility of establishing a SME bank.

The government departments and organizations include the Ministry of Finance, People's Bank of China, and China Banking Regulatory Commission.

But the NDRC has yet to make a timetable for the establishment of the country's first SME bank.

Discussions to establish a SME bank came after more than 67,000 smaller enterprises went bankrupt because of global economic conditions in the first half of this year.

More than 10,000 of those that went bankrupt were labor-intensive producers in the country's textile industry.

It is projected that more than two-thirds of the country's textile companies will have to restructure to meet new demands.

Banks across the country have granted loans valued at more than 2.2 trillion yuan to Chinese companies this year, but only about 300 billion yuan, or 15 percent of the total, went to SMEs.

In response, the China Banking Regulatory Commission issued a notice urging banks and other financial organizations in the country to change their policies and grant more loans to SMEs, according to an official from China Banking Regulatory Commission

The official hopes banks and financial groups will establish a partnership strategy with SMEs to help them overcome their difficulties in financing and fundraising.

Suggested moves include opening multiple channels to raise funds, further lowering thresholds for SMEs to apply for loans and providing better financing services.

Many banks have promised to further simplify procedures for SMEs applying for bank loans in the coming years.

The Chinese government expects that the country's SMEs will play an increasingly important role in China's economic growth, so preferential policies will be formulated for taxes, land use rights, loans, financing, employment, foreign trade and the expansion of Sino-foreign co-operation.

"That means SMEs on the Chinese mainland will be able to enjoy many more preferential policies for development in the near future," an NRDC official said.

(China Daily September 22, 2008)