The Study Of Relationship Lending:Evidence From SME Financing In China

SMEs Play very important role in China’s economic development, which plays a key role in promoting economic growth, creating jobs, promoting innovation, exports, invigorating the market, but also face many problems in their development process, and the most severe problem is financing difficulties, which restricts the development of SMEs to some extent. SMEs’financing difficulties mainly due to asymmetric information between banks and enterprises, the bank can’t make a correct assessment of business loans based on valid information. Because of the influence of many uncertainties, the bank will choose to cut back the loan size. Relationship Lending aims to alleviate information asymmetry between banks and enterprises to solve the financing problems of SMEs.Scholars study Relationship Lending in different countries and different financial system, the results show that under different economic environment and financial system, the effectiveness of relationship lending are different. China, as a developing socialist country, its macroeconomic environment is quite different from the developed capitalist countries, so the study of relationship lending in China is valuable.Firstly, the article describes the theoretical reason of relationship lending generation. For information asymmetry leads to "adverse selection" and "moral hazard ", banks will implement credit rationing for SMEs for risk aversion accordingly, which results in SMEs’ financing gap. Relationship lending alleviates information asymmetry between banks and enterprises, and then solves the financing difficulties of SMEs. Then, the article explain the theoretical basis of relationship lending, including asymmetric information theory, credit rationing theory, the modern financial intermediation theory, and summarize the existing research on the effects of relationship lending for SMEs financing availability, the qualification of the loan. Finally, the article verifies the effects of relationship lending on SMEs’financing efficiency, financing cost and loan qualifications via empirical study. The study includes the relationships between application corporate and bank, affiliated corporate and bank, guarantee corporate and bank, and measure the relationship duration by the way of weighted method, which makes the study more realistic. The results show that the establishment and maintenance of relationship lending may increase the availability of SMEs financing, reduce their financing costs, but its impact on collateral is not very clear. With regard to the determination of the relationship scope, maintaining the relationship with three banks can make the lowest financing cost, so it is the best strategy.