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China will push more lending to manufacturing sector next year

China will actively help firms in the traditional manufacturing sector to get out of liquidity trouble next year, the banking and insurance regulator said on Friday, after recent liquidity woes and bond defaults by private firms.

The Banking and Insurance Regulatory Commission (CBIRC) has carried out window guidance to banks to not stop lending to manufacturers including textile, apparel and paper-making companies facing temporarily liquidity problems and will promote the use of creditor committees next year to help firms resolve their troubles.

China’s banking sector is facing pressure as economic growth slows to its weakest in nearly three decades. Five regional banks were hit with management or liquidity problems this year, raising the prospect of devastating debt bombs lurking.

Non-performing assets of some small- and medium-sized banks are rising, curbing their lending capability, Yang Liping, chief supervision officer with the regulator told reporters at a briefing in Beijing.

The CBIRC and other relevant regulators are studying the bad loan risk disposal plans of small and medium banks but the process of absorbing bad loans needs time, and the situation would not improve in the short term, Yang said.

“We’ll use designated approaches to resolve different problems of high-risk smaller institutions. But firstly, we need to know the real level of asset quality and then help them to increase capital,” Yang told Reuters on the sidelines of the conference.

In another measure, authorities will push another 2 trillion yuan ($285.5 billion) of new inclusive loans to small and medium firms next year, according to Li Junfeng, chief of the inclusive finance department of the CBIRC.

The government previously vowed that the growth of lending to smaller firms by the country’s big five banks would be no less than 20% in 2020.

In response to recent discussions on whether a grace period for the implementation of asset management rules would be extended, the CBIRC said it would make small and proper adjustments based on the actual situation, without elaborating on any extension period.

In a continued push to open up, the CBIRC also approved the setting up of a wealth management joint venture by Amundi Asset Management and Bank of China Wealth Management, the country’s first wealth management company with a foreign controlling shareholder.

“New wealth management JVs will be regulated under current regulation framework,” according to Wang Daqing, large bank department chief at the CBIRC. Wang said there are other foreign asset management firms in talks with Chinese banks on setting up similar joint ventures.
Source: Reuters (Reporting by Cheng Leng, Lusha Zhang and Se Young Lee; Editing by Alison Williams)

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