OREANDA-NEWS. September 11, 2014. BOC released its interim results and became the first among the four major state-owned banks to do so. At its results release conference, BOC President Chen Siqing offered his insights into how to solve financing difficulties for small and micro enterprises ("SMEs").

The Fundamental Solution to the Financing Bottleneck: Comprehensive and Deepening Reform

When talking about the issues of financing difficulties and high financing costs faced by SMEs, President Chen Siqing expressed frankly that, "Despite the current downward pressure on the Chinese economy, the ongoing economic restructuring, and other myriad and complex factors that have contributed to the financing bottleneck for SMEs, the fundamental solution lies in comprehensive and deepening reform, which can offer both the temporary and permanent cures."
High financing costs are principally attributable to three factors: i) rising funding costs of banks lead to higher lending rates; ii) a longer financing chain also increases the financing costs of enterprises; iii) SMEs have relatively higher operational risks, resulting in relatively high financing costs.

Cure to the Chronic Financing Problem: Step up Credit Grant Efforts
In accordance with the deployments of the executive meetings of the State Council, BOC has launched a series of policies and measures to support the development of the real economy, especially SMEs.

According to its interim report, the Bank granted loans of RMB350.7 billion to domestic SMEs under the "BOC Credit Factory" program, up 12.60% over the end of last year; and loans of RMB1,009.3 billion to medium-sized enterprises, up 8.08% over the end of last year; both were higher than the average increase rate of domestic corporate loans. In addition, its loan extensions to strategic emerging industries amounted to RMB377.2 billion, up 21.8% over the end of last year. Relevant industries include energy saving and environmental protection, new-generation information technology, biology, high-end equipment manufacturing, alternative energy and new materials, featuring the fastest-growing loans. In line with the government's support of "agriculture, rural areas and farmers", the Bank granted related loans of RMB1,129.8 billion, up 6.1%.

According to President Chen, BOC has actively assumed its social responsibility; tilted credit resources towards SMEs, including those in the traditional manufacturing sector, related to "agriculture, rural areas and farmers", and in the service sectors associated with people's livelihood such as provision for the aged, education, health care, culture, energy saving and environmental protection, instead of relying only on mortgage-backed guarantees or financial statements of enterprises; and boosted service efficiency. BOC has also set up a special credit quota for SMEs to ensure both the increase rate and increment of credit grants to SMEs are no lower than the increase rate of all loans and the increment of last year. Furthermore, it has stepped up internal management, constantly improved the "BOC Credit Factory" model targeting SMEs, and enhanced loan approval efficiency, with the approval cycle shortening from the original one month to 3-5 days now; launched "BOC Wang Luo Tong Bao" under which SMEs can apply for and obtain loans via its official website, e-commerce or third-party platforms, and access its products conveniently; formulated service solutions in line with the operational features of the industry to meet the financial demands of SMEs from different sectors.

Precise Solution to High Financing Costs: Give Away More Benefits to Society

Speaking about the solution to high financing costs, President Chen stressed "giving more benefits away to society". BOC is obviously the most internationalized among the big four Chinese banks, and commands dominant advantages in foreign currency operations. Though foreign currency loans feature a relatively low interest margin and high capital occupancy rate, BOC has still scaled up foreign currency lending to support the development of the real economy and practically help enterprises lower financing costs.

Meanwhile, in active response to the spirit of the executive meeting of the State Council on July 23, BOC has reduced and exempted financing charges on SMEs and exercised strict charging management. Since August 1, it has waived the financing service fee on SMEs (including financial advisory fee, financial market consulting fee and corporate finance consulting fee, etc.); cancelled the perennial financial advisory fee, corporate loan commitment letter fee, personal revolving credit line commitment fee, fee for change of corporate finance service conditions, Zhi Xin Tong charge, and bill finance consulting service fee; clarified that the house mortgage registration fee is payable by the Bank; and provided a free account to every customer including enterprises, free of annual charge and account management fee (including petty account management fee).

In the future, BOC will earnestly carry out the spirits of the 49th and 57th executive meetings of the State Council and follow the requirements of the Guiding Opinions of the General Office of the State Council on Taking Various Measures Simultaneously to Focus on Alleviating the Problem of High Costs of Corporate Financing, further enhance the awareness of serving the real economy, properly arrange all kinds of resources by closely centering on the financial needs of the real economy, and realize positive interaction between the Bank and the real economy.