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Political Advisor Calls for More Financial Support to Small Enterprises

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China's political advisors have urged government to give green light to the establishment of more small banks to help finance capital-thirsty small enterprises, which are more vulnerable to the blows of international financial crisis.

"The stability of small enterprises affects China's employment (rate) and social stability," Shen Jianguo, vice chairwoman of the All-China Federation of Industry and Commerce, said Saturday at a plenary meeting of the Second Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC).

Small enterprises refer to those with a bank credit line of 5 million yuan, assets worth of less than 10 million yuan or annual sales of less than 30 million yuan, according to a document of the China Banking Regulatory Commission (CBRC).

Shen said small enterprises, largely labor-intensive and privately owned, is the bulk of Chinese enterprises and big banks are usually reluctant to lend money to them, which they consider more risky.

Statistics showed that short-term outstanding loans to private commercial businesses from 13 shareholding banks in China reached 141.8 billion yuan in 2008, accounting for only 2 percent of the total outstanding loans of those banks, said Shen, a member of the CPPCC National Committee.

In the first half of 2008, 67,000 small and medium-sized companies, each with a business volume exceeding 5 million yuan, closed and laid off more than 20 million employees, according to the National Development and Reform Commission. But the commission didn't say how many small enterprises were among them.

That figure doesn't include service industry firms or small companies with sales of less than 5 million yuan, as there are no authoritative figures available on those categories.

No official figures showed how much the small companies contribute to China's economy, but early reports said China has about 4.3 million small and medium-sized companies (SMEs) and they provide about 70 percent of new jobs every year.

The Chinese central government has already increased financial support to small companies.

Premier Wen Jiabao said in his government work report to the parliament on Thursday that central government funding for the support of small and medium-sized enterprises will increase from 3.9 billion yuan to 9.6 billion yuan this year.

The China Banking Regulatory Commission (CBRC) said at the end of last year that the commission planed to set up new institutions to improve financial support to small enterprises to avoid widespread bankruptcies and massive lay-offs.

(Xinhua News Agency March 7, 2009)