How do weaknesses in the banking system discourage banks from downscaling?
Chinese commercial banks often lack specialized departments and staff to target these sub-groups of potential clients. It is also a capacity problem. A major gap area is skills training specifically for SME-related credit risk management and analysis. Lack of credit scoring technology is a major obstacle to willingness to take on more MSME-related work; on the MSME side, lack of transparency in governance structure can make analysis difficult in China. The capital market lacks financing specially adapted to SMEs. Risk-based pricing is undeveloped; if an SME proposal doesn’t fit under the larger traditional corporate grid of tests, it tends to be rejected. There are therefore many elements that do not join up. The PSBC has the opportunity to fill this gap if it is willing to inject precisely the knowledge and praxis currently not being adopted by its peers.
