News Banks Established Amid Economic Slowdown
The government decision in approving three new private banks showed the country’s latest effort in creating impetus by deepening reforms even in the presence of an economic slowdown. The banking regulator gave the green light in establishing the three banks that are fully funded by private firms which include Tencent’s Webank.
The breakthrough in the financial reform came just in time as the country’s growth has slowed from a double digit pace in the past decades and various structural problems ranging from insufficient funding for small firms stunted growth. Growth have picked up slowly from 7.5 percent year on year for the second quarter from 7.4 percent in the first quarter of the year, although the upturn is not yet solid and the momentum needs to be consolidated.
To be able to maintain medium and high speed growth, several Chinese leaders stated in various occasions that the country should seek impetus in three ways namely adjusting economic structure, improving people’s lives and deepening reforms. Setting up private banks is also one move towards that direction as finance is being regarded as the life blood of the economy and is also an important aspect in deepening a comprehensive reform.
Small firms that lost the race against loans with much stronger state owned companies and are paying higher rates compared to their state peers can now embrace more opportunities with the introducing of the new private banks. Although skeptics are doubtful that the three banks is still limited given the huge size of the Chinese economy along with a great number of small firms.