The China Banking Regulatory Commission (CBRC) has sent a missive to to several locally operating financial institutions, urging them to investigate and clear the possible impediments to private sector lending, Reuters reports. With previous regulations holding up the growth of the private sector in China and banks in the country cutting spending dramatically in April of this year, industry experts are speculating that the move may be an attempt to avoid a possible economic retraction and subsequent recession.
"The results of the Chinese banks' investigations must be submitted by May 20."
"The important part of the document is to implement State Council requests and notifications; the key points are areas where policy solutions have not been put into place, or measures have not been introduced, impacting private investment's stable and sustainable growth," CNBC reports one unnamed source saying about the move. Chinese regulators request that the results of the banks' investigations be submitted by May 20.
China has notably struggled in their shift from state-run banking to embracing the private sector, and with recent stock market fluctuations many private investors are wary of additional enterprise funding in the country. This has manifested in the form of a dramatic slowdown of private sector investment – falling from rates near 25 percent in 2013 to just 10 percent last year and finally ending at just over 5 percent in 2016.
"We plan to downsize our business rather than expand," Bruno Chen, who runs Ningbo Tengsheng Garments Co., told Yahoo Finance. "We cannot feel any improvement in the economy."
In response, state-backed fixed-asset investment has risen 23.7 percent from the previous year. Prior to the CBRC imperative, the investments were viewed as disproportionately bolstering and protecting state-run organizations. With limited global demand for Chinese manufactured goods, many are concerned that the state intends to transfer weak assets to private investors so as to offset the use of credit to support SROs.