Reuters—Zhou: Accelerated Interest Rate Reform Helps Smaller Enterprises Out

Jun, 14, 2011, BEIJING (Reuters) – The tight monetary policy adopted by the Chinese government has put the SMEs in face of various challenges, like fast-growing costs and financing difficulties. Zhou Qiren, monetary-policy commissioner of the People’s Bank of China said that accelerating the country’s interest rate reform might be a solution to relieve the SMEs’ pressures.

Zhou was quoted Tuesday by Financial News as saying credit funds should be distributed in the principle of “loans go to those who can endure higher interest rate, the only way that promotes economic transition, as well as industrial restructure simultaneously”.

Zhou said as long as the scarcity of resources increases, it becomes more important to make good use of price mechanisms. Policies need to favor the financial institutions which are capable to serve the SMEs effectively , in terms of increased credit limits, more flexible interest rates and better support to their SME-related innovations.

Zhou also stressed that China’s monetary policy is supposed to concentrate on the aggregates - a norm must be upheld even when structural problems occur. He said the robustness of monetary policy, i.e., maintaining purchasing power of the Yuan is long-term objective, rather than an immediate goal.

Chen Dongqi, vice dean of Academy of Macroeconomic Research, NDRC said earlier that currently it is not yet good timing for complete relaxation in monetary policy as the economic growth slows down. Credit tightening will continue, while policies and measures for the next step might witness reduce in tightening strength and narrow down in range.