Financial restrictions should be eased to encourage domestic acquisitions and mergers, especially for private, small-and medium-sized enterprises, Zhang Wenkui, a deputy division chief of the Development Research Center of the State Council, said in Shanghai on Oct. 24. Industrial consolidation should also allow room for smaller, innovative companies, he said at a financial forum. Last year, the China Banking Regulatory Commission issued a new rule allowing commercial banks to extend loans for mergers and acquisitions. However, the rule contradicts the Lending General Provisions issued by the central bank in 1996, which prohibits borrowers from using bank loans for equity investment.

The China Banking Regulatory Commission has warned urban commercial banks not to "expand blindly," urging them instead to seek a steady rate of return on assets, according to a statement posted on the regulator's website on Wednesday. “Urban commercial banks should not blindly pursue scale, speed and ranking,” CBRC chairman Liu Mingkang said at a banking conference in Shanghai on Tuesday. The warning is likely to lead to a slowdown in overall new lending, as the big four state-owned banks have reined in loan growth and joint-stock commercial banks are restrained by declining capital adequacy ratios.