China's city commercial banks should direct more of their lending to small businesses in a bid to boost the private sector and address regional economic disparities, a senior banking regulator said in remarks published late on Tuesday.
Wang Zhaoxing, vice-chairman of the China Banking Regulatory Commission, said growth in city commercial banks to date has supported the private sector and provided more lending to small enterprises.
But it was the "the duty" of banks to improve services for small businesses, and they should strive to reduce fees and offer new financial products, Wang said in a speech to bankers, adding that too much lending was focused on real estate and sectors suffering from overcapacity.
The banks also need to extend their coverage in rural areas and do more to promote technological innovation and the development of strategic industries, he said.
Total assets at China's city commercial banks reached 30.5 trillion yuan ($4.6 trillion) by the end of September, up 166.9 percent compared to five years ago and accounting for 12.7 percent of the country's total banking industry.
Loans from city commercial banks reached 11.7 trillion yuan by the end of September, 38.2 percent of their total assets. Loans to small and "micro" enterprises accounted for 44.1 percent of that total, up 8.26 percentage points compared to five years ago.
Wang said there were still considerable risks facing China's banking sector, including persistent regional economic imbalances. The rapid growth in financial markets and high rates of leverage at commercial banks have also posed liquidity risks, and some banks still suffer from weak corporate governance.
He said banks need to maintain a differentiated credit policy in a bid to tackle problems like zombie firms or overcapacity in sectors like steel and real estate.