A Study On Challenges Facing China's Credit Guarantee

SMEs which plays an important role in the development of national economy. It serves to increase financial revenue, maintain the balance among various economical sector, ease employment pressure and maintain social stability. It is also beneficial to promoting scientific innovation and accelerating the pace of innovative country.SMEs have been booming since Reform and Opening-up. However, because of their size, weak regulation, financial institutions are unwilling to offer lending them. SMEs are restricted by law and relevant regulations to finance directly, which narrowes down their development space. The function of credit guarantee agencies is to increase the credit standing of SMEs, enhancing their financing capacity. The development of credit guarantee system is strategically significant to SMEs.This paper explores the legal issues of China's credit guarantee by comparative and positive analysis. It presents specific measures to meet challenges facing China's credit guarantee by borrowing foreign experience.This paper probes the problems in China's credit guarantee based on a real case. It points out that there are 4 problems in China's credit guarantee. They are institutional deficiencies, guarantee multiplier failure; risk management mechanism failure and agency dysfunction. This paper expounds the general characteristics among countries like Japan,America by exploring their credit guarantee system. In those countries, they have precise legislation, reasonable guarantee multiplier, sound risk management mechanism and strong operation protocol. This paper also advances specific measures to enhance China's credit guarantee.