A Proposal To Privatized SME Finance Problem Solutions

Since china's opening and reform policies were adopted, China's small and medium sized enterprises (SMEs) experience a long-termed growth. They have already become an important part of national economy, and a main force to support is rapid and continuous growth. However SME finance problem is becoming the bottleneck that restrict the growth of SMEs, especially the privatized SMEs. Firstly, the finance problem that privatized SMEs are now facing is described: 1) narrowness of financing channels and singleness of financing pattern; 2) Internal finance is a very important source of SME capital, but its shortage is limited supply; 3) privatized enterprises finance is largely discriminated, which causes scarcity of indirect finance; 4) SME Direct finance is long-term trend, however with too much difficult; 5) high financing costs. Then from three different viewpoints—SMEs', FIs' and the government's, the reasons behind SMEs' financing troubles are analyzed.Secondly, five elements that influence SMEs' finance are further discussed: enterprises internal elements, economical environments, policy environments, legal environments and financial environments. Partial improvement of each element can lower the financing difficulties; nevertheless, the ultimate solution lays on the improvement of privatized SMEs financing environments.Lastly, based on above analysis, proposals and countermeasures are put forward from three aspects. The government should set up a thoughtful legal system that eliminate prejudice on privatized SMEs; set up SME promotion agency;perfect the financial market system, and expand SMEs' financing channels; broaden the credit interests margins; set up social credit system; reduce taxation, etc. The FIs should change traditional ideas, provide financing facility, deepen the FIs' reform, rebuild enterprise systems, encourage product innovations, use foreign relationship credit practices for reference. The SMEs should boost up corporate diathesis, improve external financing capacity with internal finance as the core, be familiar the financial markets to find the most suitable financing channels.