China delays change to bank capital rules China will delay the implementation of strict new capital rules for its banks until next year, addressing concerns that a rush to enforce the regulations would crimp lending and weigh on the slowing economy . Beijing had initially planned to introduce the bank capital standards, putting China under the global Basel III regime, at the start of this year - a full year ahead of the phase-in period stipulated in the Basel agreement. By moving the start date to January 1 2013, Beijing confirmed that those original plans were too ambitious. The new timeline brings China in line with other countries. "We will implement a reasonable transition period for the capital adequacy standards, ensuring that lending growth will continue at an appropriate pace," Wen Jiabao, the Chinese premier, said in after chairing a cabinet meeting. He also confirmed that the government would give banks a special dispensation on lending to small and medium-sized companies, which generate about two-thirds of Chinese growth but have been traditionally starved of credit. The government will lower the risk weighting assigned to SME loans in calculating banks" capital ratios to encourage more such lending. As in other countries, Chinese banks deemed to be systemically important will be required to meet capital adequacy ratios of 11.5 per cent, while other banks will be held to a 10.5 per cent minimum. Most Chinese banks already meet the Basel standards after a hefty round of equity raising over the past two years, but questions about the need for additional capital for those on the edge of the rules, such as Bank of Communications and Agricultural Bank of China, have weighed on their stocks. Of even greater concern to the government has been the slowdown in lending in recent months. Banks lent Rm680bn ($107bn) in April, well below market expectations, and lending at the start of May was also reported to be weak. The supply of credit through the banking system is one of the government's main tools for supporting the economy, but lending has faltered this year because of weak loan demand and also because banks have been extremely wary of running up bad debts. Chinese economic growth slowed to 8.1 per cent in the first quarter and is on track to dip further this quarter. Along with postponing the implementation of the Basel rules, China has taken other steps to shore up its banks over the past few months. It has approved lower dividend payouts from the biggest state-owned lenders, reduced loan-loss provisioning ratios and also eased off the enforcement of regulations at the local level. Taking their orders from the government, Chinese banks went on a lending spree in 2009 to power the economy through the global financial crisis. Although officials are still trying to get a handle on the bad loans that resulted from the credit binge, many analysts believe the government will adopt the same approach if the economy slows sharply again this year.