By Tu Lei (chinadaily.com.cn)
Updated: 2008-01-15 15:44

Some bank branches are mulling improvements to the loan rates for small and medium-sized enterprises (SMEs) and new industries to hedge against losses brought by the 2008 new loans limit, according to today's Shanghai Securities News.

Industrial Securities predicted the lending rate will float about 30 percent based on the benchmark rate, which means the one-year loan rate for SMEs is expected to reach 9.7 percent, assuming the central bank does not intend to increase interest rate before the end of 2008.

"The enterprises can shoulder the loan rate," said an anonymous source with the risk control department of China Everbright Bank, adding some enterprises' one-year rate for commission loans has reached 10 percent.

Compared with the risk of a fund chain breaking up, the expenditure on loans is still worthwhile, said an expert from Shanxi branch of Industrial Bank. He said in Shanxi Province, some enterprises' short-term loan rates increased as much as 60 percent over the benchmark.

A new financial research report from Galaxy Securities shows during the mid-term in 2007, listed banks' loan yield increased 1.02 percent for every percentage point in loan amount growth, while the loan yield floated about one percent as the interest rate floated 5 basis points.

The central bank has ordered the country's financial institutions to offer no more than 3.63 trillion yuan ($500 billion) in new loans this year. That amount is equal to last year's total, as the measure is intended to keep the loan growth rate under 13.86 percent.

China raised the one-year loan rate to 7.47 percent after rates grew by a factor of six in 2007.