By Joe McDonaldBEIJING -- China's premier pledged to tighten risk controls on its banks and see that they do more to help entrepreneurs to sustain economic growth in the face of a possible global slowdown. Speaking at a weekend financial planning conference, Premier Wen Jiabao said China's financial industries are sound but still face risks. He also pledged to press ahead with reforms aimed at giving market forces more influence over lending, but no details were announced following the two-day meeting, held to make plans for the industry over the next five years.
Wen had promised more bank lending to entrepreneurs last year after the credit crunch forced many to turn to high-interest underground lenders, but it is unclear how much lending has increased. In his weekend speech, Wen promised again to "allow market forces a greater say in deciding fund allocation," but gave no indication what changes would be made. Industry analysts worry that the multibillion-dollar flood of extra lending ordered by Beijing in response to the 2008 global crisis might leave banks with a mountain of bad debts. Analysts worry about a wave of defaults by local governments, but officials have said such risks are manageable. The government clamped down on bank lending after its multibillion-dollar stimulus fueled a surge in stock and real estate prices. A downturn in export growth prompted Beijing to reverse course and promise to ease some controls, though it said most will remain in place. The government newspaper China Daily said last week that an initiative to create a separate government department to oversee risks in the financial industry might be announced at the meeting, but there was no word on that Sunday. According to a government statement after the meeting, the assets of China's financial industry stood at 119 trillion yuan ($18.8 trillion) at the end of November 2011. It said that was a 149% increase from the end of 2006.