By George Chen
BEIJING, March 3 (Reuters) - Two top Chinese bankers have urged Beijing to provide tax incentives and relax regulations to promote lending to small and medium-sized enterprises (SMEs) to aid recovery from the financial crisis and create jobs.
Ma Weihua, president of China Merchants Bank Co Ltd (600036.SS)(3968.HK), China's sixth-largest bank, and Dong Wenbiao, chairman of China Minsheng Banking Corp (600016.SS) (1988.HK), submitted separate proposals to the government this week urging regulators to issue SME-friendly lending rules as soon as possible.
"Bank lending remains a major financing tool for SMEs in China, where SMEs are playing a more important role than ever in maintaining economic growth in the wake of the global financial crisis," Ma said in his proposal seen by Reuters on Wednesday. "In particular, the government should support lending to SMEs that can offer job creation and have innovative business models."
Ma urged Beijing to provide tax incentives to banks for SME lending.
Minsheng Bank's Dong suggested that regulators not include lending to SMEs in regulatory quotas for loans and deposits, which have been a major concern to Chinese banks.
Dong urged the banking regulator to work with the country's tax authority and Finance Ministry to draw up new rules and offer tax incentives for SME lending to improve bank profit margins.
He said individual loans of less than 5 million yuan
($732,500) for SMEs should be considered for tax incentives.
Minsheng Bank, the country's first private bank, is ranked No.7 by assets in China behind Merchants Bank. Ma and Dong are delegates to top political advisory body the Chinese People's Political Consultative Conference, which meets annually. The CPPCC 2010 annual meeting starts this week in Beijing.
SMEs contribute more than half of China's gross domestic product.
China Construction Bank (0939.HK)(601939.SS), one of the Big Four state lenders, plans to provide 100 billion yuan in funding to SMEs in 2010, state media reported on Wednesday.
Foreign banks including Citigroup Inc (C.N) and HSBC Holdings Plc (HSBA.L)(0005.HK) are also keen to expand into SME lending as many Chinese SMEs, for example, Geely, which is set to acquire Ford's (F.N) Volvo unit, has emerged as a market leader after years of rapid growth.
"Small enterprises usually receive more money from banks than they can deposit, so many banks prefer to lend to big enterprises that are also major deposit clients. This scenario makes it very difficult for SMEs to get loans" said Dong.
China's central bank and banking regulator issue lending guidelines every year to domestic banks to establish lending limits.
The China Regulatory Banking Commission has lowered its 2010 lending target to about 7.5 trillion yuan from a record 9.6 trillion yuan last year, when banks rushed to support economic growth at the government's behest.
As the regulator is in particular concerned by lending to big projects and large enterprises in some overheated sectors, banks are seeking alternatives to maintain loan growth. Regular loan and deposit operations are still major profit sources for most Chinese banks.
($1=6.826 Yuan)
(Additional reporting by Xie Heng and Samuel Shen)
((Editing by Chris Lewis))
((george.chen@reuters.com; +852 2843 6532; Reuters Messaging: george.chen.reuters.com@reuters.net))
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