Banks operating in major mainland cities are stepping up their efforts to court small and medium-sized enterprises (SMEs) as large firms are increasingly turning to international capital markets for funds.

As the financial sectors will be further deregulated soon and large businesses have more ways to find financing, banks are being forced to take a fresh look at SMEs, whose management and financial systems are often considered as less stable.

The United Kingdom-based Standard Chartered Bank said yesterday it would provide products and services to small companies in Suzhou, a second-tier city in East China's Jiangsu Province. The lender has already offered loans to SMEs in major cities including Shanghai, Beijing, Shenzhen and Guangzhou.

Standard Chartered was the first overseas lender in Shanghai to offer non-mortgage loans to SMEs. Small companies can borrow between 100,000 yuan and 500,000 yuan (US$12,500 to 62,500) from the bank's outlets in Shanghai and Shenzhen without any collateral.

The China Banking Regulatory Commission said in mid-September that the outstanding value of loans to smaller business entities increased 141.2 billion yuan (US$17.78 billion) from the start of the year. The amount of loans granted to China's SMEs exceeded 2.64 trillion yuan (US$330 billion) in the first half of the year.

About 778,600 SMEs have been granted credit from banks, up 15,900 from the start of the year, the regulator said.

A number of overseas banks and their domestic lenders have laid out aggressive plans to gain from lending to the country's myriad of privately-run small companies, which have not traditionally been targets for banks.

HSBC, Europe's biggest bank by market value, aims to attract a growing number of smaller enterprises with products and services designed for firms that have simpler demands in China, according to Neil Tottman, head of commercial banking at HSBC China.

Citigroup China said the financial giant will give a helping hand to SMEs, which are a new engine of economic growth.

Chinese banks have also taken steps to support the development of small businesses, with the latest move being taken by Shenzhen Development Bank to provide financing services to SMEs that have business deals with major enterprises.

"With large-scale businesses now having more ways to raise financing by themselves and competition in the banking sector becoming fiercer, many banks have begun to take a second and more enthusiastic look at SMEs," said Tang Jie, deputy senior manager of the corporate banking department of the Bank of Communications' Shanghai Branch.

"After all, the SME market is still virgin territory," he said.

(China Daily November 28, 2006)