Sino-German Loan Deal to Finance Selected Chinese SMEs

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Last updated at: (Beijing Time) Saturday, August 16, 2003

Sino-German Loan Deal to Finance Selected Chinese SMEs

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China's Ministry of Finance has signed an agreement with Germany's KFW to borrow 19.2 million euros (21.7 million US dollars) in government loans from Germany, which will be used to finance Chinese small and medium-sized enterprises.

The loans is part of the third phase of the Sino-German Financial Co-operation SME Credit Program, the English-language newspaper China Daily reported on Saturday.

The first and second phase of the program were conducted a few years ago.

According to the deal signed on Friday, one-third will be 10-year commercial loans and the other two-thirds 40-year soft loans.

The program will be undertaken and operated by a third party, the China Merchants Bank (CMB), a share-holding commercial bank based in Shenzhen, south China.

The Ministry of Finance of China will sign a deal with CMB to underwrite the loans.

The deal stipulates CMB, the loan undertaker, choose the loan projects and shoulder the related risks itself.

The bank can also grant Chinese-currency-denominated loans, as part of the program, to domestic enterprises who can use the money to purchase domestic equipment.

The borrowers should be the country's private enterprises or joint ventures, in which the State share is less than 50 percent, and they should be SMEs wit long-term assets or an annual turnover of less than 500 million yuan (60.4 million US dollars), said the report.

In March of this year, KFW granted a loan of the same size to the Ministry of Finance, which was undertaken by the China Minsheng Bank, a private bank in Beijing.

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