Research On Financing Difficulties Of Small And Medium Enterprises In China

Since the reform and opening-up of China’s economy, the SMEs have been developed rapidly and contributed significantly to China’s national economic growth. SMEs are playing more and more important role in promoting economic growth, creating job opportunities, increasing farmers’ income, transferring surplus labor in rural area, etc. However, SME development in China also faces great challenges because of financing difficulties.The financing difficulties China’s SMEs facing at this stage are shown in the following aspects. First, the capital market for SMEs is imperfect and lack of long-term equity capital; Second, mortgage is difficult and SMEs can pledge less material. Third, the guarantee is difficult. It is difficult for SMEs to find a suitable guarantor; Forth, the grass bank authorization is limited and the administrative procedure is complex and cumbersome. Fifth, the financing cost is high. The financing cost of SMEs is generally3-6percent higher than the lending rates of the national statutory points over the same period.To explore the reasons for SMEs financing difficulties, of course, there have their own reasons for SMEs, but also the financial system, national policy reasons. The reason business areas include:First, industry is highly competitive, technological content of products is low, production and operation of enterprises is a big uncertainty; Second, the SMEs financial system is not perfect and information transparency is poor; Third, SMEs lack collateral for guarantees assets; Fourth, SME bankruptcy rates are relatively high so that the loan risk faced by bank is high. The causes of SME financing difficulties in the financial system and national policies aspects are as follows:First, the institutions provide specialized services for the SME financing are imperfect. Second, SME credit guarantee system is not perfect; Third, collateral system still need to be improved. Fourth, the capital market is weak.To solve the problem of financing difficulties of SMEs is a systematic project which multi-pronged approach needs to be taken in order to receive better results. For SMEs, it is necessary to improve the overall quality of the operators and improve the management level. Second, it is necessary to regulate financial management and increase transparency and authenticity of the financial statements. Third, it demands to enhance credit awareness, build good credit environment. Fourth, is to change the financing concepts and regulate finance management.To ease the financing difficulties of SMEs in terms of China’s financial system and national policies could be improved from the following aspects. First, further improve the financial system construction and promote healthy development of SME. Second, improve SME financing macro environment to further develop the role of government policy support for SMEs, SME financing to support the establishment of a sound legal system. Third, actively broaden the financing channels for SMEs and establish a multi-level capital market system serves for SMEs. Fourth, actively promote SME credit mechanisms, credit products and financing model innovation. Five, actively promote the credit guarantee system construction for SMEs.