According to a report from the Wall Street Journal,"a reform program endorsed last week by the Communist Party leadership calls for letting private investors that meet certain as-yet-undefined requirements set up small and medium-size banks and other financial institutions".
The move, while vague, signals Beijing's greater willingness to support China's private sector, which has been starved for financial resources long dominated by state firms despite being an increasingly important part of the economy.
It comes after several nimble, well-known private companies have expressed interest in setting up banks, and it marks a change in strategy for the government. China's banking system has for decades effectively been the sole domain of state-owned companies, whose senior managers answer to political masters. A mainstay of China's economic growth model, the banks turned Chinese households' prodigious savings into cheap capital funneled to state-owned industrial firms.
Small and medium-size firms are major employers, but seen as a credit risk by state banks, they have traditionally relied on loans from informal sources—friends, family, other business, and underground banks—to run their businesses. Giving those firms better access to credit offers Beijing the prospect of growth, more jobs and innovation.
