Private-bank policies take time to emerge

Those who dream of running private-sector banks in Wenzhou, Zhejiang province, will have to be patient, as the detailed policies that will allow them to move forward are taking time to emerge.

In 2010, the State Council, China's cabinet, issued an advisory that was intended to encourage the sound development of private investment by introducing private capital into the financial field.

In 2012, the China Banking Regulatory Commission released a document in which it supported the entry of private capital on an equal footing with other funding into the banking industry.

It was about that time when Lyu Weiguo, the former chairman of the Wenzhou Chamber of Commerce in Shijiazhuang, Hebei province, got the idea to launch a privately owned bank in his hometown.

"We submitted our first draft in June 2012 to Wenzhou's financial office, expressing our plans to help more small and medium-sized enterprises with financial problems.

"We had noticed that there was a ray of light in the window that would allow us to have a privately owned bank," said Lyu, who is the general manager of the Wenzhou Merchants Joint Investment Center.

He's also in charge of applications for private-sector banks proposed by 12 Wenzhou-area chambers of commerce.

Lyu added that it took only two weeks for the chambers to hold final discussions on a proposal for a private-sector bank in the city. But more than one year later, all they have to show for their efforts is a reply from the city's financial office, which said that the proposal had been submitted to the appropriate department in the central government.

Wenzhou, China's hotbed of private capital, was selected for a pilot private-sector banking project in March 2012. At that point, many local entrepreneurs had defaulted on their debts and fled the city. The wave of defaults followed a September 2011 move by State-owned banks to tighten loan terms for smaller enterprises.

Under a 12-point financial reform plan for Wenzhou, the city was urged to set up an authorized system to facilitate and monitor private lending.

"We wanted to follow the model of a village bank, which was permitted under the Wenzhou financial reforms, to launch a private bank in the city by providing lower-cost loans to small enterprises," said Lyu.