The Research On The Risk Control Of Development Loans Of Small And Medium-sized Enterprises In China

Since the implementation of the policy of reform and opening up in China, thenumber of small and medium-sized enterprises (SMEs) has been increasing together withthe ever-growing firm size. This makes great contribution to the state’s tax revenue; on theother hand, more job opportunities are provided. However, due to the restrictions of thepolicy and the characteristics of SMEs, financing, especially in terms of bank loans, hasconfronted big limitations. With the outbreak of the subprime crisis in the latter half of2007, the development of SMEs has been seriously affected, so how to help theseenterprises to win development has become a very important issue. As a policy bank toprovide financial services, China Development Bank has been committed to providedevelopment loans to support SMEs.Through the analysis of the characteristics of SMEs, conclusions are made that SMEloans have higher risks. Therefore, the primary problem of the China Development Bankis how to effectively control these risks to ensure the security and continuity of loans. Thispaper focuses on research of risk control of development loans of SMEs.On the basis of a clear understanding of the characteristics of and loan status ofSMEs, this paper firstly chooses debt solvency and will to repay as the core indicators andmakes deep analysis on genuine causes of the risks from the operating and moral aspects.Then, theoretical analyses have been made on risk control of development loans. Model ofGM (1,1), utility analysis and Game between banks and enterprises are respectively usedto study operating risk and moral hazard. Based on these analyses, this paper givesoperational processes to unify control of operational risks and moral hazard and makesrecommendations on the establishment of risk control and warning mechanisms of theSME loans. Finally, suggestions are made on risk control of SME’s development loans.