SME financing in China
Université Paris X-Nanterre
Maison Max Weber (bâtiments K et G)200, Avenue de la République
92001 NANTERRE CEDEX
Document de Travail Working Paper
2007-29
Chen Xiang LIU
E c o n o
m i X economix.u-paris10.fr/
SME Financing in China
LIU Chen Xiang
Université Paris X-Nanterre
EconomiX (CNRS-UMR 7166)
Bâtiment K-115
200, Avenue de la République
92001 Nanterre Cedex
Tél : 01.40.97.59.10
Fax : 01.40.97.59.10
Courriel : liu_chenxiang@yahoo.fr
SME Financing in China
LIU Chen Xiang
Abstract
SMEs have a great contribution in China’s economic expansion. However, the financing predicament currently faced by SMEs constitutes a great bottleneck for their development. Banks are reluctant to lend to them, mainly due to the lack of collateral and their poor capability in pricing risk. This is the reason why credit guarantee institutions play a key role in SME financing and the perfection of the credit guarantee system is important for promoting their access to credit. In addition, the lifting of the ceiling on lending rates as well as other steps taken by banking authorities will encourage bank lending to SMEs. Finally, informal finance has a significant part in SME financing.
Résumé
Les PME ont une grande contribution à la croissance chinoise. Pourtant, leur difficulté de financement devient un grand obstacle dans leur développement. Les banques ne veulent pas leur prêter, principalement à cause de manque de collatéraux et la faible compétence des banques pour évaluer le risque de crédit. C’est la raison pour laquelle les organismes de garantie jouent un rôle indispensable dans le financement de PME et le perfectionnement du système de garantie est important pour augmenter leur accès aux crédits. En plus, l’enlèvement du plafond de taux d’intérêt de crédits ainsi que les autres mesures prises par les autorités bancaires vont encourager les prêts bancaires aux PME. Enfin, la finance informelle a une part significative dans le financement de PME.
Key Words: SME financing, credit guarantee, informal finance
JEL Classification: E26, E51, G21, O53
1. Introduction
The scope of private ownership has become substantial, producing well over half of GDP and an overwhelming share of exports-imports. Private companies generate most new jobs and are improving the productivity and profitability of the whole economy. The continued re-orientation of the economy towards the private sector brings considerable gains to real incomes and macro-economic
activity. It should be noted that all companies which are controlled neither by state nor by collective shareholders are considered as private companies; 98% of enterprises in non-public sector are SMEs (small and medium sized enterprises), and 98% of SMEs are in non-public sector.ihu
The changes in government polices explain importantly the emergence of a powerful private sector in the economy. In 2005, regulations that prevented privately-owned companies entering a number of sectors of the economy, such as infrastructure, public utilities and financial services were abolished. However, SMEs have always limited access to credits, which hinders heavily their businesses’ expansion and thus their healthy development. Why banks are reluctant to lend to them and how they have fallen into financing difficulties? How to resolve their financing problems and who can serve as their main supporters? This paper tries to respond to these questions and to draw the best SME financing service system.
The paper begins by evaluating the position of SMEs in the real economy as a whole and highlighting issues facing SME financing. The following section discusses formal finance’s support for SMEs, emphasizing the role of credit guarantee institutions. Ultimately, the paper presents informal finance’s development and outlines its influences on SME financing.
2. The private sector—a major driving force in economic expansion
China’s private sector has become its main driver of economic growth. In 2005, there were more than 40 million SMEs and sole industrial & commercial proprietorships (getihu enterprises), accounting for 99.6% of the total number of enterprises. They were responsible for as much as 59% of GDP. They accounted for 60% of sales value and represented 68.65% of imports & exports. They paid 48.2% of taxes, and occupied more than 75% of employment in urban areas. The regions with which SME cooperate have extended from Hong Kong & Macao to some developed countries, such as United States and Italy.
The growth in private output has been the result of the higher productivity of most companies in this sector. The sharper incentives facing the private sector companies have resulted in them using less capital and labour to produce output than state companies. Overall, the aggregate productivity of private companies in the industrial sector is estimated to be almost twice that of enterprises controlled directly by the state. The profitability of private companies has also risen considerably, and the rate of return on physical assets was double that of state controlled companies in certain provinces in 2005. Such a high level of competitiveness has resulted in the private sector accounting for more than two-thirds of all exports in 2005. While the bulk of these exports are made by foreign-controlled companies, the domestically-owned private sector is increasing its exports, as more small and medium-sized enterprises are granted export licences. (OECD, 2005).
The private sector plays a key role in a largely market-oriented economy owing to the changes in government polices. Government authorities have recognized the importance of the private sector for economic growth and job creation, and have moved to reduce a number of barriers that limit its expansion and to promote its equal treatment with publicly-owned sectors. On February 2005, the State Council issued “Guidelines on Encouraging and Supporting the Development of the Non Public Sector including Individual and Private Enterprises” that include 36 articles for improving the operating environment for private business. The new guidelines give much-improved market access to private companies in many industries that were previously restricted, including those that are dominated by state monopolies and heavily regulated sectors such as public utilities, financial services, social services and national defence. The directives also mandate equal treatment of private and public business, calling for rescinding of rules that discriminate against private companies and direct ministries and local governments to carry out implementation of the new constitutional amendment guaranteeing private property rights. In terms of access to financing, the new guidelines direct financial regulators to expand access to bank, equity and bond financing, through pro-active treatment of private companies under the interest rate liberalisation, and through impartial treatment of private companies in capital market access. A subsequent survey by the All-China Federation of Industry and Commerce showed that entrepreneurs cited the new market entry and financing access articles to be the most important.
豫公网安备41160202000603
站长QQ:729038198
关于我们
投诉建议