The Study On Relationship Financing To Improve The Financing Situation Of SMEs In China

This article elabrated on the theory of the relationship financing,combined with the success story of the Zhejiang Tailong commercial bank which has located in providing financial services for small business, and have carried on empirical analysis using the data of the Shenzhen SME Board. The paper has used a variety of research methods to discuss how the relationship lending theory solves the problem of financing of SMEs in our country. The main conclusions of this paper are as followed, firstly, the relationship lending can effectively increase the availa-bility of SME financing in China, so as to improve the financing situation of SMEs; secondly, small and medium banks relative to large banks, have a comparative ad-vantage in dealing with the soft information, and are more suitable for relational financing.Financing of SMEs is a worldwide research project. Information asymmetry is an important factor to affect enterprises to obtain loans from commercial banks. Relationship financing is financing activities based on private information and long-term relationship, it can effectively solve the problem of asymmetric infor-mation between banks and enterprises.The purpose of commercial banks providing capital is to obtain the long-term rent, while as users of the funds, the enterprises plan to undermine the information asymmetry by the mode of relationship financing, so they can increase the funds and expand financing channels. The primary costs of relationship banking lie in the soft-budget constraint and the hold-up problem. Small and medium-sized banks are more suitable for the relationship financing, as the comparative advan-tage in collecting and processing the soft information.There are three typical forms of relational financing in the world. They are Japan’s main bank, universal banks in Germany and the community banks in the US.1990s late, China have tried the main bank system which is a typical form of relationship banking. With these specific cases, it has provided some useful lessons to the development of relational banking in China.Recent years, Zhejiang Tailong commercial bank has attracted academic at-tention as its rapid development. Tailong bank has located in the provision of fi-nancial services to small businesses from its establishment. It effectively solved the problem of asymmetric information in the lending process of SMEs by the fi-nancing form of relationship banking.Whether the relationship financing could improve the financing situation of SMEs, or to increase the availability of funds, the thesis carries on empirical anal-ysis and testing dating from533sample enterprises in the Shenzhen SME board. The empirical results show that, there is a significant positive correlation between the relationship financing variables and the total corporate borrowing.If we want to put the relationship finance theory into practice, using the rela-tionship lending to improve the financing situation of SMEs in China, three meas-ures can be taken as followed:First, the government needs to lead the market to establish a reasonable and effective financial system and banking system; second, banks should make a reasonable market orientation based on their size status; third, SMEs should make their efforts to establish relational financing with several banks for the loan, and they must pay attention to their reputation and the good faith in the long-term repeated bank-enterprise game.The writing of this thesis is built on the basis of research results of previous work. First of all, we should appreciative of the previous researchers who have do lots of work and efforts. Secondly, the innovation of this article may be as fol-lowed:first, the paper has using the relationship financing theory to give a com-prehensive analysis on the success case of Zhejiang Tailong commercial bank. Second, this thesis has using of data and information of553companies listed on Shenzhen SME board in2010for the empirical analysis. The empirical results provide a new empiric evidence for the relationship financing theory.Although I have held the serious and rigorous academic attitude, and tried to do my best, but limited to my research level, there are still a lot of inadequacies. These deficiencies are:it is not comprehensive enough on the research of the rela-tionship financing theory, such as the influence of which the financial market competition or the banking industry merger exerts on the relationship financing is not in-depth study; in empirical research,for the lack of the date of SMEs and the credit data of relationship banking, the paper has used the data of companies listed on the SME board of Shenzhen for empirical analysis, which has weakened the representative and convincing.It should be noted that the relational financing has a variety of different means of expression, and relationship lending, relationship credit and relationship lending have the same meaning in this article. In addition, the relationship financ-ing not only refers to the bank-enterprise relationship, but also includes other forms of relationship financing between non-bank financial institutions and enter-prises, but the study object of this paper is just the bank-enterprise relationship.