Covid-19: Millions of Chinese firms face collapse if banks don't act fast

While China's government has cut interest rates, ordered banks to boost lending and loosened criteria for companies to restart operations, many of the nation's millions of private businesses say they've been unable to access the funding they need to meet upcoming deadlines for debt and salary payments. Without more financial support or a sudden rebound in China's economy, some may have to shut for good.

Support from China's banking giants in response to the outbreak has so far been piecemeal, mostly earmarked for directly combating the virus. Industrial & Commercial Bank of China Ltd, the nation's largest lender, has offered relief to 14,000 small businesses, or about 5 per cent of its small business clients.

Stringent requirements and shortlists restrict who can access special loans earmarked by the central bank for virus-related businesses, while local governments and banks have imposed caps on the amounts, according to people familiar with the matter.

At most risk are the labour-intensive catering and restaurant industries, travel agencies, airlines, hotels and shopping malls, according to Lianhe Rating. Banks are hardly any better off themselves. Many are under-capitalised and on the ropes after two years of record debt defaults. Rating firm S&P Global has estimated that a prolonged emergency could cause the banking system's bad loan ratio to more than triple to about 6.3 per cent, amounting to an increase of 5.6 trillion yuan.

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