Sme Financing In China's Legal Dilemma And The Way Out

Since the 1990th, the unique functions of SMEs (small and medium enterprises) on the economic functions such as acting as the engine of economic development, creating employment opportunities and optimizing the industrial structure have been recognized by the Chinese society.The topic on the development of SMEs has got unprecedented attention and emphasis. However, restricted by the special political system and policies of today's China, the development of SMEs is faced with various economic,systematic and legal contradictions and problems which can not be overcame by enterprise themselves. Financing difficulty, as the most protruding problem causes universal attention in industry.Starting with the analysis on the main channels and their separate characteristic of financing by SMEs, this article first investigates inner and outside financing channels and the contributions of financing difficulties are as follows:Firstly, the inner financing channel is highly disproportion but minor growth compared with the outside financing channels. Secondly, Bank loan and equity financing as well as bond financing are disproportionate. Lastly, the limited channels,the barriers on the innovation of financing methods and the shortage of motivations by enterprises and financial institutions are also the contributions of financing difficulty. On this basis, the writer anatomizes the legal predicament and barrier behind every single financing channel from the view of law, and pays special attention on the existing situation and shortage of legislation on market entry conditions,market supervision and multi-market construction of both direct financing channel (which means bank loan) and indirect financing channel (which means capital financing), as well as the legal blanks of emergent financing channels such as Second Board and VC (Venture Capital). The advanced experiences on the construction of legal system on the aspect of SMEs' financing and the support of SME's of countries as USA,EU,Italy and Japan are also introduced for studying here in order to find a solution to the financing difficulty. In the last part of this article, the writer deeply approaches to the improvement of the exiting legal system which may adapts and even facilitates the variation of financing channels and the standardization of financing performances.