Industrial and Commercial Bank of China (ICBC), the country's biggest bank, is boosting loans to small and medium enterprises (SMEs) despite higher risks from this type of lending, its chairman said Saturday.

Like other domestic banks, ICBC has traditionally lent to State-owned firms rather than smaller private firms, even though these now make up the majority of businesses in China.

"Lending to SMEs is a must for Chinese commercial banks because the market for traditional banking services is becoming smaller while there is great demand for loans from SMEs," chairman Jiang Jianqing told a forum in Beijing.

Between January and November, the bank had extended 162 billion yuan (US$20 billion) in new loans to 26,000 domestic SMEs, up a third from the start of the year, he said.

Lending to small firms accounted for 22 percent of new lending in the first 11 months, he said.

ICBC is one of three big State banks given cash by the government to help clean up their balance sheets as they look to sell shares to investors.

Despite efforts to improve credit risk controls, the bank has reported its bad loan ratio rose to 4.6 percent in September from 4.5 percent at the end of June.

Small firms in China have long faced difficulties getting bank loans and official credit curbs imposed since 2003 have choked off funds to many fast-growing private firms, forcing them to borrow from unofficial lenders at higher interest rates.

(Shenzhen Daily December 12, 2005)