China central bank to boost support for smaller firms

FILE PHOTO: A woman walks past the headquarters of the People's Bank of China (PBOC), the central bank, in Beijing, June 21, 2013. REUTERS/Jason Lee/File Photo

BEIJING (Reuters) - China’s central bank will improve its policy transmission mechanism to further step up financing support for smaller firms, its governor, Yi Gang, said in remarks published on Wednesday.

The People’s Bank of China has been pumping out more cash to spur bank lending, but faces difficulty in channeling credit to small firms, vital for economic growth and employment at a time of rising trade tension.

The PBOC will treat state and private firms equally on policies including credit and bond issuance, Yi said in a statement posted on the central bank’s website.

The government will coordinate monetary, fiscal and regulatory polices to “stimulate financial institutions’ enthusiasm”, and will build a sustainable financing model for small firms, he added.

Yi made the remarks during a meeting with executives of private companies and senior officials from commercial banks, the statement said.

Private company officials at the meeting said they faced pressures from economic slowdown, the impact of government policies to cut debt, higher financing costs and tougher pollution curbs, it added.

Commercial firms remain reluctant to lend to small and private firms, which they consider to be riskier than state-owned firms.

The central bank has cut reserve requirements for banks three times this year to boost liquidity, with further reductions widely expected.

Reporting by China monitoring desk and Kevin Yao; Editing by Clarence Fernandez