Nation working to support real economy

China is moving to support its real economy by expanding loans for infrastructure and small businesses, a move that experts said could help ease external pressure from a trade row with the US and stabilize domestic economic development.

The China Banking and Insurance Regulatory Commission (CBIRC) said in a statement Saturday that it has encouraged banks and insurance companies to increase funding for the real economy.

Preliminary data showed that new yuan-denominated loans in July stood at 1.45 trillion yuan ($212 billion), up 75 percent from the same period last year.

Lending to the infrastructure sector rose to 172.4 billion yuan in July, up 37 percent from June, the CBIRC said in the statement.

“To ensure financing for projects under construction and raise funding support for weak areas in the country’s infrastructure is necessary at the moment, since in the first half of the year, investment in the infrastructure sector dropped a lot,” Xu Gao, chief economist at China Everbright Securities Asset Management, told the Global Times on Sunday.

The move might have also been directed at shaking off the effects on the Chinese economy from the escalating trade conflict with the US, which has hindered China’s export businesses, one of the main driving forces of the nation’s economy, said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.

But, Dong warned that investment in traditional sectors by itself won’t benefit economic development in the long run, adding that China should further boost investment in the tertiary sector to promote the upgrading of its economic structure.

The CBIRC also urged banks to write off more bad debts and increase lending to small businesses. The statement showed that these banks’ lending also flowed to small- and micro-sized enterprises. In the first seven months of 2018, bank lending to these enterprises rose 1.6 trillion yuan, faster than the increase in overall bank loans during the period.

“Funding small businesses is the new driving force for China’s economy, but lending to small businesses could be risky, as well as profitable. Banks should keep the risks in a controllable range when extending loans,” Dong noted.

Expanding loans would also ease liquidity problems that added pressure to the real economy in the first half of the year, Xu said.

Dong noted that China would continue to implement its economic transformation and upgrading work and the move would be accelerated by the China-US trade tension. Such efforts would benefit the nation’s long-term economic development even if it's more painful, he said.