A Study On The Financing Difficulties Of Cninese MSEs During The Drisis Of Finance

Medium and small enterprises (MSEs) are a new enterprise community emerged since China's reform and opening up which has made active contributions to China's economic and social development. So far as early 2009, there were totally 10 million MSEs in China, comprising over 90% of the total number of enterprises with employment of 174 million people. In terms of contributions, MSEs generate a value of end products and services that comprise over 50% of GDP, create employment that comprise 75% of the total urban and town employment of the whole country, realize exports of products, technologies and services that account for 60% of the country's gross volume of exports and achieve tax revenue that represents greater than 40% of the total tax revenue of the country. With the deepening of economic system reform in China, the economic weight of MSEs will continue to increase. MSEs are the main force of urban economy, the principal guarantee for meeting domestic demand, main channel for employment, main block for farmers'income increase, the main carrier of structural readjustment and the main drive for scientific and technological innovation. The stable and sustained development of MSEs has an extensive and far-reaching significance for the stability of national economy, the perfection of market economic system, the holistic competitiveness of the country's economy and even social stability.However, the problem of financing difficulty has been restricting the development of MSEs in China which are currently in a stage of rapid capital accumulation and fast scale expansion and are in huge demand for funds. However, many factors such as MSEs'smaller business scale and lack of stable performance, bigger risks and difficulties in guarantee and pledge which seriously confines the grant of loans, defective financial management and internal management, generally lower degree of good faith, diversity of operational and organizational forms and failure of exchange of information with outside, significant dissymmetry of information…all these factors have made financing a difficult problem for MSEs. Currently, while MSEs take up over 50% of the total output of the country, they obtain less than 20% of the total value of loans. Especially since the outbreak of global financial crisis, the problem of financing become even more of a bottleneck for the survival and development of MSEs.This paper mainly addresses the problems currently existing in the financing of Chinese MSEs and, through analysis of the factors causing financing difficulties in combination with foreign successful experience in breaking through the financing difficulty of MSEs, proposes pertinent policy suggestions with respect to government, banks and enterprises.