China pushes banks to offer bridge finance for M&A

BEIJING, Dec 8  - Chinese banks should increase loans to companies that are leaders in their fields so they can take over rivals that run into difficulty due to the economic slowdown, a senior regulator said in remarks published on Monday.

Yang Jiacai, a department head at the China Banking Regulatory Commission, named real estate, textiles, cement, automobiles and coal as sectors that are ripe for consolidation.

"Owing to the global economic crisis, some Chinese firms are in trouble and have been forced to halt production, providing a historical opportunity to carry out industrial consolidation and create core firms," he wrote in the official Financial News.

Banks should provide bridge loans to facilitate such mergers and acquisitions, Yang said.

He said banks should also tailor their services to help urban residents invest their savings and finance the purchase not only of cars and homes but also services such as travel and education.

In rural areas, lenders should help people to expand their businesses and transfer their land-use rights, Yang added.

The Financial News said in a front page editorial that banks would lend out more than 4.6 trillion yuan ($668.9 billion) in 2009, 15 percent more than this year's estimated total of 4 trillion yuan.

Major banks, including Bank of China <3988.HK> <601988.SS> and China Construction Bank <0939.HK> <601939.SS>, have already announced plans to step up lending in line with Beijing's efforts to stimulate growth, which is slowing sharply. (Reporting by Langi Chiang)