Huaxia Bank Co Ltd, a mid-sized Chinese commercial lender, has been offering more innovative financial services for small and medium-sized enterprises, transforming its business.

Zhao Junxue, secretary of board directors of Beijing-based Huaxia Bank, said at a media conference on Thursday: "Our bank implemented the strategy to become a financial service provider for SMEs because the old profit model that relied heavily on net interest margins is unsustainable, thus forcing commercial lenders like us to change our business and client structures."

The bank launched an innovative loan scheme, allowing the SMEs that passed its annual review to enjoy automatic one-year loan extensions for two consecutive years at most, without repaying their loans in the first place.

In the past, the one-year bank loan maturity was usually shorter than the production cycle of small businesses, so a large number of SMEs had to turn to high-cost private lending to repay their loans.

Zhao said, "Our loan scheme has relieved the pressure on small companies to make arrangements for interim financing before the next stage of financing is obtained. It's equivalent to cutting our lending rates for SMEs by 2 percentage points."

As of June 30, more than 3,000 clients had participated in the special loan scheme of Huaxia Bank and saved financing costs of more than 200 million yuan ($31 million). The bank had provided loans to 24,000 small corporate clients. Its outstanding loans to micro and small enterprises had reached nearly 220 billion yuan.

According to the China Banking Regulatory Commission, the outstanding loans of Chinese banking institutions to small businesses had amounted to 22 trillion yuan by the end of June, up 15.5 percent from the previous year.