Tag Archives: SME

Majority of enterprise loans go to private sector

Loans to private companies in Guangdong rose 15.12% to RMB4.29 trillion in the first half, accounting for the majority (54%) of total lending to companies, official data shows. 

Guangdong banks remain the country’s richest. At the end of June, the province’s balance of domestic and foreign currency loans was RMB15.88 trillion, a year-on-year increase of 16.2%; the balance of various deposits was RMB22.54 trillion, a year-on-year increase of 11.9%.

Private SMEs are getting the attention they deserve, apparently. As of the end of June, the balance of small and micro loans was RMB1.35 trillion, up 17% since the beginning of the year. 

Whither Shenzhen?

The SCMP has an article out today decrying the slowdown apparently being experienced in Shenzhen. Although it tries to find other sources besides real-estate brokers to explain why commercial property vacancies are an indicator of tough times that appear set to continue for the near term, it largely fails to do so. Instead, the article quotes sources from yacht salesmen – yes, yachts, that bellwether of domestic consumer demand – and randomly chosen tech entrepreneurs providing personal anecdotes of struggles with high costs in the mainland’s most expensive city. Then it goes back to real-estate brokers who acknowledge that a recent crackdown on P2P lenders has had a big chilling effect on high-end office supply. And then, as if to silence all further debate, it throws out the nearly 60% vacancy rate in Qianhai, a special economic zone that is still essentially a work in progress.

Perhaps more interesting as a scientific study of what is going on in Shenzhen is a local media report looking at the growth of small and micro enterprises in the city. According to the China Business Research Institute, no fewer than 192 large-scale industrial enterprises have moved out of Shenzhen over the past three years. The report concludes that this is worrying, because these enterprises may (or may not) be dragging a whole supply chain with them. 

However, this number is actually a drop in the bucket. For all the hand-wringing by journalists on either side of the Shenzhen-Hong Kong border, the bigger picture is one of resilience amid a challenging external environment. Last year, Shenzhen added 485,000 commercial entities to its company register, bringing the total to 3.19 million. Meanwhile, the city’s total R&D investment exceeded RMB100 billion last year, while 3,185 new State-Level High-Tech enterprises were established, bringing the total to more than 14,000, of which SMEs accounted for more than 80%. SMEs contributed RMB1.1 trillion to Shenzhen’s GDP last year, accounting for 47.8% of the total. 

There are undoubtedly pressures facing Shenzhen as it seeks to climb further up the global value chain. Chief of these are its high housing prices. Others include what one might expect from a rich city that is looking to move up: environmental regulations are tightening, pushing labor-intensive and polluting industries inland.

As you may have guessed by now, dear reader, we can be counted among the bulls when it comes to the outlook for Shenzhen. Although companies across a wide range of industries are moving out of the city, and will continue to do so for the foreseeable future, they are part of a bigger story of industrial upgrading and economic restructuring. They will be replaced by higher-technology, service-oriented startups. 

The idea that Shenzhen is running out of runway is preposterous. The city still has a long way to go to catch up to Hong Kong in a number of indicators: per-capita GDP and Michelin-starred restaurants being only two of the most important. It has already surpassed Hong Kong in international hi-tech patents awarded, despite having no internationally ranked universities. What it has, most importantly, is grit, imagination, and a leadership that is focused on the longer term. Watch this story unfold with us.

Read more in Chinese. 

Banks feel heat on startup loans

As a price war intensifies among banks competing to offer loans to small businesses, the central bank said that it will encourage large banks to provide more support for smaller companies that have yet to borrow money from financial institutions, reports Caixin Global. 

The country’s five biggest state-owned banks (ICBC, Agricultural Bank, Construction Bank, Bank of China and Bank of Communications) expanded their lending to small businesses – defined as companies with total credit lines under RMB10 million ($1.5 million) – by at least 30% this year. In the first five months this year, the average interest rate of the loans the banks issued to small businesses was 4.79%, down 0.65 percentage points from last year’s average.

Last week, Guangdong announcedthat it will ensure at least RMB45 billion in low-interest loans are made available via the provincial brand of Bank of China to help fund the growth of small and micro enterprises (SMEs). Readmore. 

Guangdong to boost SMEs with loans

The central government has for months been exhorting the country’s banks to get credit flowing towards the part of the economy that needs it most: the private sector. Guangdong has answered the call, announcing today that it will ensure at least RMB45 billion in low-interest loans are made available via the provincial branch of Bank of China to help fund the growth of small and micro enterprises (SMEs). 

From today until 2021, the project will offer support to more than 30,000 SMEs based in Guangdong. Qualified candidates will get loans within three days at an annualized interest rate of less than 5%. Evaluation and intermediary expenses will be exempted. 

These loans come in different shapes and sizes. “Fast-Growth Loans” are, as the name suggests, for companies currently working out of their apartment who want to be the next Tencent. They will be able to apply for RMB1.5 million of mortgage-free credit loans during their incubation period, and another RMB1.5 million for a year after they graduate. Best of all, they can apply and draw down the cash online.

“High-Growth Loans” are different. These are for enterprises recognized nationally and those established in “innovative areas” such as high-tech zones. Amounts are flexible.

“Technology Reform Loans”, meanwhile, are aimed at specific enterprises recognized by the government as being in need of an upgrade. 

And last but not least, “Liquidity Loans” are for SMEs who already have current accounts or deposits in the Bank of China’s Guangdong branch. Simple application procedures will facilitate access to credit lines of up to RMB 2 million with a one-year balance settlement term.

What are you still reading this for? Get online and grab your cash while stockpiles last.

Read morein Chinese.