Current Situation Of SME Financing Guaranty System In China

At present,Chinese SMEs play an important role in relieving employment pressure, improving economic distribution,maintaining the vitality of market competition and promoting coordinated economic development,and so on.They have already become the motivator of sustained economic growth and social stability,the importance in national economy is more and more obvious.However,it is difficult for many SMEs to gain bank's finance under the present defective guarantee system due to small scale,instable operating condition,low credit grade,lack of acceptable pledge and mortagage.Financing constraint has become a bottleneck for SMEs' further development,and the real reason is their difficulty to gain guarantee.Under this circumstance,the innovation,promotion and development of financing guarantee system become an important way to improve Chinese SMEs' financing situation.Based on the above,in this paper the author introduces the general situation and financing difficulty of SMEs firstly,secondly analyses the importance of the guarantee system for SME's financing.In summary,to establish a suitable guarantee system for Chinese SME can effectively deal with the adverse selection and moral risk caused by information asymmetry in the process of financing,and furthermore,to provide strong credit support for expansion of financing channels, ultimately to relieve and resolve the SME's financing problem.The credit guarantee system for SME has been established in 1998 in China.Since June 1999,the State Economic and Trade Commission issued "Guidance on Establishment of Experimental SME Credit Guarantee System", from being,a series of regulations and notifications have been issued,to encourage and support the credit guarantee organizations for SME.As the national policies' promotion result,Chinese financing guarantee system has developed rapidly,the "One Body Two Wins Four Tiers" guarantee system for SME has formed initially.But this system is till imperfect in venture capital compensation,operating mechanism,profitability,risk diversification and control mechanism. Therefore,we must learn from western advanced theories and experiences,perfect our guarantee system to be suitable for Chinese financial situation and management mechanism.In this paper,the author starts from the SME guarantee reality in our country,explains western advanced guarantee experience,including case study,at last proposes to perfect Chinese SME guarantee system,and to improve the current situation gradually.