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C. Bank: China to widen firms' finance options

(Reuters)
Updated: 2007-04-13 19:53

China will step up efforts to create more diverse channels for firms to raise funds in order to reduce their reliance on bank lending, a central bank official said in comments published on Friday.

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Ma Delun, assistant governor of the People'sBank of China, said that China needed to speed up financial innovations in such areas as derivatives and structured products.

China would cultivate more institutional investors and improve market-making and money-broking systems in its inter-bank market, so as to lay the groundwork for firms to raise more funds in capital markets, Ma said, according to excerpts of a speech published on the central bank's Web site (www.pbc.gov.cn).

"Strongly pushing forward the development of corporate direct financing will help increase the overall effectiveness of the financial market, help monetary policies better filter through, and perfect macro controls in the financial system," he said.

Encouraging firms to raise more funds on their own would also help ease financial risks in the banking system, Ma said.

The central bank last week announced the third increase in the proportion of deposits that banks must hold in reserve this year, part of its effort to curb excessive credit growth and to avoid a boom-bust cycle in the economy.

Meanwhile,?China has been trying to create more financing options for companies other than borrowing from banks, including by expanding the corporate bond market, to reduce the risk of a fresh crop of bad loans should the economy see a downturn.