Monday, October 10, 2011 - 22:19

China Raises Loan Quota For Crisis-Hit Wenzhou: Press

BEIJING (MNI) - China's banking regulator has raised the loan quota in crisis-hit Wenzhou city by CNY100 as part of a bailout package seeking to ease conditions amid a liquidity crunch, the 21st Century Business Herald reported Tuesday.

The newspaper quoted an unidentified source as saying that the Wenzhou branch of the China Banking Regulatory Commission has raised the proportion of discounted bills that banks are allowed to hold as a proportion of outstanding loans to 50% from the previous 30%, equivalent to CNY100 billion in new lending.

The move is designed to encourage banks to expand their support for local small and medium-sized enterprises, which have been hit by a liquidity crunch resulting in several absconded business owners and hundreds of millions of unpaid debts in private hands.

The CNY100 billion is in addition to a reported CNY60 billion yuan in one-year bailout loans that the Zhejiang provincial government has applied to the People's Bank of China for, the newspaper said.

"Injecting money is the top priority," an official participating in the bailout efforts was quoted as saying.

Banks are adjusting interest rates and loan structures as part of the efforts, bank officers were quoted as saying, though loan-deposit restrictions are crimping the flow of lending in the city.

Local banks have set aside CNY30 to CNY40 billion of their lending quota for SMEs, the newspaper said, citing Zhou Songshan, deputy director of the central bank's Wenzhou branch.

The Bank of Wenzhou has applied for an extra CNY2 billion credit quota from the central bank, while the PBOC's branch office in Wenzhou has applied CNY900 million as part of a rural lending quota.

Banks, regulators and the local government will also cooperate to reallocate loan quotas between branches, the newspaper said.

Officials are now under pressure to ease the liquidity crunch in the city -- long a posterchild for China's private economy -- after Premier Wen Jiabao made a high profile visit there over the National Day public holiday to call for greater support for small and medium-sized companies. ** Market News International Beijing Newsroom +86-10 5864 5241**

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