BEIJING—Having delivered an interest-rate cut to help big state-owned companies and local governments cope with debilitating debt, China’s central bank is grappling with another thorny task: how to steer credit to the private businesses Beijing deems crucial to growth.
The quarter-percentage-point reduction in benchmark lending and deposit rates on Sunday was primarily aimed at addressing debt-repayment problems that are increasingly weighing on the Chinese economy. But the rate action is likely to bring less benefit to the small companies that Beijing is counting on to shift to a more sustainable growth path, largely because Chinese banks remain reluctant to lend to them.
To prod banks to make credit more accessible for borrowers the government wants to promote, the People’s Bank of China will speed up “targeted” measures in the coming months, according to PBOC officials and economists, giving banks more liquidity on the condition that they lend more to these groups.
Looking ahead, “targeted policy tools will likely play a bigger role,” said China economist Haibin Zhu at J.P. Morgan Chase & Co.
But even within the central bank, it’s an open question how effective such measures will be. For most of last year, the PBOC had resisted “big-bang” stimulus such as interest-rate cuts to avoid adding to China’s debt burdens. Instead, it took a number of tailored measures such as cutting the amount of rainy-day reserves and providing lower-interest-rate loans only for banks that cater to small and agricultural businesses.
However, those efforts haven’t paid off in any meaningful way, say bankers and analysts, as small corporate borrowers still find it hard to get loans, especially from large banks that see them as riskier than bigger companies.