The economic slowdown in China's economy pushes the People's Bank of China to cut the interest rate for its debtors and to help big corporation and local governments with increasing debt in China's central bank. Aside from this major concern, they are also being confronted by the task of handling credit to private businesses considering that is risky decision in improving the situation.

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The reduction on the quarter percentage and deposit rates is targeting the debt-repayment problems that dragging continuously the Chinese economy. As a result, small companies in Beijing only get less benefit and Chinese banks are unwilling to lend money to them. Currently, they are trying to find a better way to improve the condition of its economy.

 Uncertainty is still present in the current situation and the PBOC has been doubtful of the result because for almost a year, they try to avoid "big-bag" like interest cut because it might add to the China's debt burden. Instead they try another measures like cutting the cost of rainy-day reserves and providing lower-interest loans exclusively for banks that cater small and agricultural businesses.

According to analysts reported by The Wall Street Journals, those efforts haven't gain any positive results because many of these corporate borrowers still have difficulty in getting loans from large banks. It causes the small business to shut down, because the banks are considering them at greater risk of bankruptcy compared to the bigger corporation.

 Mr. Li Oiang who is a load officer at Guangrao Rural Commercial Bank in eastern China who specializes in lending to private businesses said that many banks are afraid about the risk of credits from small businesses and he is having a hard time convincing all his clients to pay the loans on time. That's also the reason why they are being not qualified of having new credit.

 Smaller banks cope up with the situation by increasing the deposit rates to the maximum capacity of the back just to attract savers but not to the point that they are losing their profits. Banks refuses to cut the lending rate especially to small and private clients. This follows the interest rate cut reported by CNBC News.

TagsLoans, Small Business, Small Firms, Loans For Small Firms