The Research On Financing Predicament Of Small And Medium Enterprises In China

This paper aims to provide the relative theoretical explanation to small and medium enterprises (SMEs)’financing problems in the period of Chinese economic transition and to study the feasible improving institutional arrangement on this basis.From worldwide in light of, every country places great importance on SMEs’ financing problems because of its important position in the development of national economy. Since the 30 years of China’s reform and opening up, the development of SMEs has made great progress. It plays a significant role in promoting the reform of economic system, stimulating economic growth, expanding employment and etc. But its development plagued by the financing problem is difficult to solve, especially since the 2008 financial crisis, SMEs found itself in a tight corner over dual pressures of demand and industry upgrading.Combining the analysis of institutional factors the article reviews the related theories and documents of SMEs’ financing problems in the process of development and investigates the validity of firm theory, credit rationing theory and capital structure theory in Chinese current market environment.Based on the empirical analysis of Chinese listed SMEs’ financing order, the article analyses SMEs’ dependency on credit market and study the cause of financing problem. In current market environment, institutional factors highly affect the efficiency of the credit market. Enterprises’ defect governance structure brings asymmetry information to the credit market to cause banks implementing credit rationing and it becomes the primary causes of the financing problems of SMEs. The financial repression causing by government intervention weakens the competitiveness of the credit market, intensifies the banks’ credit rationing, even causes the credit discrimination, thus further worsens the financing environment.According to the result of the institution analysis, to alleviate SMEs’ financing problem, this paper discussed the feasible institutional arrangement profoundly. By perfecting the credit information sharing mechanism, alleviate the unbalance between the SMEs and the bank, decrease the bank, especially the SMBs’ credit rationing behavior to the SMEs. On the other hand, this paper analyzed the credit market’s character in China by using a two-price equilibrium model with non-diversifiable risk. To restrain the deviant financing behavior from the marketing rules by strengthening the legal system, relaxing the credit marketaccess, accelerating interest rate marketing process, facilitating the transform from informal credit market to formal market so as to increase the provide to the SMEs financing.This paper’s features are:first, highlight the connection and mix among the enterprise theory, institutional change theory, credit rationing theory and capital structure theory, elaborated the economic theory about SMEs financing systematically and overall, and introduce the business cost centered systematic analysis into the research on SMEs financing, try to structure the new theoretical frame. Second, the empirical analysis model on SMEs financing succession considered the adaptability to our financing circumstances sufficiently. Choosing the model’s variables can reflect the features of the SMEs capital use in China. Finally, analyzing the credit market’s character in China by using a two-price equilibrium model with non-diversifiable risk, and discussing the simultaneous existence of the informal and formal credit market, the accumulated risks and the loss of social welfare brought about by the two-price equilibrium.Generally this paper found out that the financing problems of SMEs mainly involves the fundamental institutional arrangement and the improvement of credit information sharing mechanism. They promote the development of market reputation mechanism and restrain the adverse selection and opportunistic behavior causing by asymmetric information in the financing market effectively. The deterrent of law can eliminate the credit market frictions and inhibit the market financing behavior. And the loosening of government regulation would further enhance the credit market competition and increase the supply of credit to SMEs. The development of the above mentioned institutions will reflect Chinese economic reform advanced exquisitely. It will improve the financing environment for the SMEs to promote their development and will also provide strong support to the national economy’s sustainable development.