Research On The Solutions Of The Difficult Financing Situation Of SMEs In China

The difficult situation of financing has been universallly recognized as the most important one of the factors that restrains the development of small and medium-sized enterprises, and has already become a world-wide challenge that perplexes economic theory community, business community and the relevant government departments in the world. The role and importance of SMEs in the economy development have already been recognized and approved by many mainland scholars, and have been one of the government's particular attention in China. SMEs have already become an important force in promoting the sustainable economic growth and creating employment opportunities. A fundamental solution of financing difficulty of SMEs is not only hampering their own development, but also a major subject about the sustainable and healthy development of national economy.Besides the introduction part, the article is divided into five sections:Section 1, The Summary and Review of Domestic and Foreign Literature. It provides an overview of foreign literatures from the aspects including the financing structure of SMEs, the asymmetric information and market failures in SME financing, how to overcome the obstacle of asymmetric information in SME financing, and how to improve the financing system and institutional environment for SMEs. In the meanwhile, the domestic literatures are also summarized by this article from some aspects, that is, the information barriers to SME credit and countermeasures, the barriers of system to SME financing and solutions. Overseas research and achievements are relatively abundant, but are based on the background of the developed market countries. Their theoretical explanation and policy proposal are not fully suitable to China's reality. Though domestic scholars have also carried out some related research, it is necessary to summarize and sort out. Based on this suammary, the applicable, systematic and effective policies and measures are proposed.Section 2, The Development, Financing Channels and the Difficult Financing Situation of SMEs in China. Based on the analysis on the role of SMEs in China's economic and social development, this article figures out that the difficult finaning situation has still not been resolved effectively. From the view of demand and availability of financing channels for SMEs, the theoretical and empirical analysis on the financing channels indicates that bank loans are still the main external financing channel of SMEs in China at present. SME financing difficulty mainly refers to credit difficulty that lead China's SMEs into the difficult situation of finaning in general.Section 3, The Analysis of the Causes of the Difficult Financing Situation of SMEs in China. This article tries to establish a systematic analysis framework, make a sub-level analysis on the causes of the difficult financing situation of SMEs in China, and explore in-depth the causes of the difficuly of credit financing. First of all, this article analyzes the impact of the characteristics of SMEs, the information environment and the legal environment on the credit behavior of individual commercial banks. It indicates that information asymmetry between banks and enterprises have drived banking transaction cost high, and has caused the difficult financing situation of SMEs in China. The non-standard governance structure of SMEs in China resulted in the tendency of information internalization, business and management volatility, and a serious lack of credibility. China's social credit information system and enterprise credit rating system is not yet mature; relevant legal and judicial system is imperfect, bank debt right can not be protected competely. Consequently, commercial banks suffered the asymmetric information of SMEs, the transaction cost is also higher。This situation results in bank's "refusal to loan" or execution of mortgage-based credit and eventually a general SME credit difficulty. At the same time, the underdeveloped credit guarantee system for SMEs is also an important reason for the credit difficulty in China. Secondly, the paper analyzes the significant impact of the system variables (ie.the financial management system, the credit market structure, etc.) on SME credit. This paper points out that there are scale discrimination and ownership discrimination in the SME credit of the state-owned monopoly bank in China. Banks, with their monopoly position, tend to raise loan conditions, which results in the lack of incentives to obtain information and establish the credit evaluation and monitoring system. In stead, they use financial report-based credit and real estate mortgage credit, and therefore, the information problems are more serious in SME credit market. The development of medium and small-sized financial institutions is not ideal in China; private loans are underdeveloped and very irregular. They are not able to meet the financing needs of SMEs. The over-regulation to commercial bank credit requires governance structure and business strategy of the banks in China change, result in "credit crunch" to SMEs.Section 4, The Country and Regional Comparison and Reference on Financing System and Support System. By choosing The United States, Japan and other representative countries and regions as samples, the paper makes comparasive analysis on the characteristics of financing market system and policy support system of the SMEs. This article pointed out that these countries and regions have their own characteristics of finance market system and support system, but they all established multi-layer financial market system, necessary policy support system and support measures for SME financing, which is the basic experience that SME financing difficulty is improvd fundamentally. At the economy transformation stage, compared with other countries and regions, China has different characteristics in specific national conditions, economic structure, financial management system, financial system, and so on. It is not practical to simply copy the successful experiences of other countries in the short term. To solve the problem of financing, considering the reality in China, we must selectively absorb and learn from these successful experiences of these countries and regions. Gradual establishment and improvement of financing market system and policy support system of SMEs is in line with China's national conditions.Section 5, The Analysis of the Countermeasures of Solutions of the Ddifficult Situation of Financing of SMEs in China. In recent years, some policies and measures that alleviate the difficult financing situation of SMEs have been adopted in China, but the effect is not ideal and satisfactory. The fundamental way of solutions of the difficult financing situation of SMEs is to establish a sound SME financing market system, so as to attain the sustainable development of SME financing on a commercial basis. To this end, we should deepen reformation of the financial system, eliminate the "financial repression", develop a large number of local private small and medium banks to serve SMEs, develop various types of direct financing market, so as to open widely financing channels for SMEs; China should establish a functional SME financing policy support system, continue to strengthen the construction of credit information, law and other basic environment, and establish a policy support system with a multi-level, diversified credit guarantee system as the core. In the short run, in order to solve SME financing difficulty, banks should change organization structure, establish an independent franchisee of credit for SMEs, improve approval mechanism, incentive mechanism and due diligence exemption mechanism. On this basis, the Government should increase the credit indicators of large and medium-sized commercial banks, improve the risk compensation mechanism, reform the existing local small and medium-sized financial institutions, make parts of the private finance eligible legalization and guide and regulate its development. In the long run, the SME Loan franchisees should become independent corporate banks for SMEs; the the existing local small and medium-sized banks should be transformed into the SME banks with a wide range of property rights; the regulation of financial markets should be loosed, private small and medium-sized banks served to SMEs should be developed; various types of capital markets should be developed; so as to eventually SME financing market system with the local small and medium financial institutions as the main body should be established. On the basis of the establishment of SME franchise organizations, innovation in credit business of franchise organizations should be encouraged, commercial banks should actively carry out the relationship-financing suitable to characteristics of SMEs, develop mortgage financing, and innovate credit rating; establish and improve the SME credit guarantee system for financing In the short term, it is necessary that the policy-oriented credit guarantee system is enhanced, while in the long term, it should be changed from government-dominant model to a market-led or government-led model, establish the credit guarantee system with commercial guarantee institutions and mutual guarantee institutions as the mainstream and with policy guarantees as supplement; improve the constuction of the social credit information of SMEs and the legal and judicial environment, constantly promote the the constuction of SME credit information system, encourage and promote the establishment of a variety of levels and types of information intermediary.