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China to open up banking sector with permission for more private lenders

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China to open up banking sector with permission for more private lenders

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China’s banking regulator has announced a pilot scheme allowing the setting up of three to five privately financed banks.

The move, which would create more competition for existing big state-owned lenders, is intended to boost financial support for cash-starved smaller companies.

Those small and medium sized firms account for 60 percent of China’s gross domestic product and three quarters of new jobs, but they are struggling to cope with weaker global demand and tight credit.

The news hit shares of mainland Chinese banks on Hong Kong’s Hang Seng Index.

The banking regulator also said it would take steps to rein in banking risks in 2014, and reiterated plans for measures to resolve risks linked to local government financing vehicles and tighten rules on wealth management products.