A Study On The Finance Problem Of China's Small And Medium-sized Enterprises

Twenty years' carrying out of the Opening policy witnesses the rapid development of China's SMEs. The latest data indicates that, presently, among the corporate units in China 99% are SEMs, moreover, 50% of China's GDP, 60% of total export and 43% of revenue are contributed by SMEs. SMEs are the main body to solve employment problem, which absorb above 75% of township labor force. SMEs' achievements are the focus of world attention. However, during the development of SMEs, there lies some obstacles severely limit SMEs' becoming bigger and stronger, such as insufficient competence, backward technology, low added-value, inefficient management and finance problem, etc, among them finance problem is the contributing factor.Finance problem is a mutual problem that SMEs around the world face during their development, therefore, research on this problem is the focus of scholars. As early as the fifties of last century, developed countries began their research and have achieved a series of theoretical fruits. China, owing to the long-term big-enterprise strategy in the planning economy, supports the development of big enterprises only while neglect SMEs, so it lacks the basis for the research on the finance problems of SMEs. It was not until the breakout of Asian Financial Crisis at the end of the last century that Chinese government, entrepreneurs and scholars realized the importance of SMEs, and the research on the finance problem of SMEs began.China's scholars have put forward some opinions on how to alleviate the finance problem of SMEs. Presently there are two dominating opinions: one is facilitating SMES to finance from Shanghai and Shenzhen Stock Exchange Market, or establishing a second-board market for SMEs; the other is developing small and medium-sized financial institutions for SMEs. This paper absorbs the latter, the reason is that as far as direct finance is concerned, the requirements of Shanghai and Shenzhen Stock Exchange Market is so critical that most SMEs cannot meet the demands, as for second-board market, despite that there are successful practice abroad, such as the NASDAQ in America, we should know that the establishment of NASDAQ is based on mature market economy and sound operation of the main board market, and China's situation is that she is in the preliminary stage of market economy, there lies some defects in Shanghai and Shenzhen Stock Exchange Market such as the defects of institutional design, lacking of high quality investors and the weakness of supervision, thus these factors determine that direct finance is invalid for China's SMEs. As far as indirect finance is concerned, although the four state-owned commercial banks have changed their role of "the second finance", they are still not modern commercial banks, they only serve state-owned enterprises supported by the state credit, because the cost of lending to SMEs is high and the responsibilities that the credit staff would shoulder are much more heavier when frozen loan occurs. Although the state-owned commercial banks have set up credit departments for SMEs according to the requirement of the People's Bank of China to support the development of SMEs, they only lend to those with sound accounting systems, good credit, high payoff and abundant collaterals, however, these SMEshave sufficient cash flow and are not in urgent need of bank lending, consequently most SMEs can't get loans from theses banks and have to turn to non-governmental financial institutions, which is mainly composed of "underground private bank". Non-governmental financial institutions are willing to lend to SMEs because in the first place, the lending rates are much higher than legal rates, in the second place they can identify the quality of SMEs with low cost through their advantage of localization. Undoubtedly, non-governmental financial institutions can alleviate the finance problem to a certain degree, however, they lack of formal operation regulations, moreover, they are beyond the supervision of the government and can easily to trigger financial crisis which might eventually lead to social disturbance. Therefore, the first thing first at present is to take measures to guide the non-governmental financial institutions to come up from underground, bring them into the supervision of the government, and set up regional small and medium-sized financial institutions that establish relationship lending with SMEs, in this way the non-governmental financial institutions can get legal identity while the finance problem of SMEs is solved, which is the opinion of this paper.This paper includes five chapters:Chapter 1, illustrates the theme and background of this study, and defines some related conceptions.Chapter 2, surveys domestic and overseas finance theory, which will be served as the theoretical basis of empirical analysis.Chapter 3, compares the successful experience of developed countries, and find out some we can learn from.Chapter 4, discusses the source of the finance difficulty of China's SME through empirical analysis.Chapter 5, raises some suggestions regarding how to alleviate the finance difficulty of China's SME.