FINANCE

Exclusive: Chinese Banks Guided to Help Clear SOE Arrears to Private Firms

Published: Sep. 18, 2025 8:04 p.m. GMT+8

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The move aims to ease the funding squeeze on small and midsize enterprises amid the economic slowdown. Photo: AI generated

Major Chinese banks are being guided to issue loans to local government-linked entities so they can pay off some of the vast arrears they owe private businesses, Caixin learned from people with knowledge of the matter.

However, banking insiders have raised concerns that rules aiming to curtail hidden government debt and the weak financial state of some of the debtors may limit lending.

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Major Chinese banks are directed to lend to local government-linked entities to help repay 1.8 trillion yuan ($253 billion) in arrears owed to private businesses.
The initiative involves the "Big Six" state-owned banks and 12 national joint-stock banks, with priority on debts under 500,000 yuan and a target completion by June 2027.
Concerns remain about hidden government debt, weak debtor finances, and limited viable loans due to compliance risks and strict regulations.

AI generated, for reference only

Who’s Who

Industrial and Commercial Bank of China: The Industrial and Commercial Bank of China is one of China's "Big Six" state-owned commercial lenders participating in a debt-clearing campaign. This initiative aims to help local government-linked entities repay 1.8 trillion yuan ($253 billion) in arrears owed to private businesses. The bank, like others, will lend to local state-owned enterprises, local government financing vehicles, and public institutions.

Agricultural Bank of China: Agricultural Bank of China, a "Big Six" state-owned commercial lender in China, is participating in a government campaign to clear arrears owed by local government-linked entities to private businesses. The bank, along with others, will issue loans to four types of entities to help them repay debts, prioritizing smaller arrears. This new policy allows the use of working capital loans for this purpose, a practice previously prohibited.

Bank of China: Bank of China is one of the "Big Six" state-owned commercial lenders participating in a debt-clearing campaign. This initiative involves issuing loans to local government-linked entities to help them repay arrears owed to private businesses. A Bank of China employee noted that the new policy allows entities to use working capital loans for project construction arrears, with funds directly disbursed to creditors.

China Construction Bank: China Construction Bank (中国建设银行) is one of China's "Big Six" state-owned commercial lenders. It is participating in a government campaign to clear arrears owed by local government-linked entities. These entities include local state-owned enterprises (SOEs) and local government financing vehicles. The bank, like others, will be guided to issue loans to help these entities repay their debts to private businesses.

Bank of Communications: Bank of Communications is one of the "Big Six" state-owned commercial lenders in China. It is participating in a government-led campaign to guide major Chinese banks to issue loans to local government-linked entities. These loans are intended to help these entities pay off arrears they owe to private businesses.

Postal Savings Bank of China: The provided article does not mention the Postal Savings Bank of China. It refers to the "Big Six" state-owned commercial lenders and 12 national joint-stock commercial banks participating in a debt-clearing campaign, but does not specify which banks are included in these groups.

AI generated, for reference only

What Happened When

In 2024：: The Ministry of Industry and Information Technology led the drafting of an arrears list. Targeted entities were required to register all arrears outstanding as of June 30, 2024.

As of June 30, 2024：: Entities including local SOEs, financing vehicles, and two types of public institutions were instructed to register all outstanding arrears.