Shanghai's bad loan risks 'kept at bay'

In new guidelines on financial services for small businesses, the CBRC told commercial lenders that the number of small companies getting loans should be at least equal with the previous year, and the approval rate for small companies' loan applications should also be at least steady with the previous year.

These targets were added to a previous directive that credit growth to small companies should not be lower than the average growth of various types of credit.

Zhang Jinping, deputy director of the CBRC's financial inclusion affairs department, said: "We now put more emphasis on greater coverage of small companies by bank loans and a larger rate of success for their loan applications. This will complement our country's economic restructuring."

Liao said that the banking regulator could further target the amount of credit by asking banks to increase the number of small firms receiving loans of less than 5 million yuan.

According to his experience, these companies have more difficulty borrowing at low costs than big companies.

He suggested that China learn from the United States and South Korea when it comes to enacting laws that mandate commercial banks support small enterprises or communities with a certain proportion of its loan assets.

Local governments could also form financing guarantee companies that they fund and manage, he said.