Legal Dilemma And Countermeasures Of SME Financing

For the last thirty years since reform and opening up, the economic developmentand market prosperity of China were contributed not only to the stimulation of largestate-owned enterprises but also to the growth of small and mediumenterprises(SMEs). With the economic takeoff in recent years, the rapid developmentof SMEs has gradually become an important force driving Chinese economic growth.Although the economic status of SMEs is rising, the way for their growth is full ofthorns. The narrow financing channel, which is a century-old problem, has restrictedChina SMEs’development in a long term. Although SMEs have many advantages,such as numerous numbers, wide distribution and flexible operation modescompared with large enterprises, the disadvantages are also obvious for them. Andbecause of their limited possession of resources, especially the lack of money, SMEsare often in disadvantage in the competition with large enterprises and tend to lackof stamina in facing economic fluctuations and market changes. Upon this situationthe relevant government agencies issued a number of legal documents attepting torelieve this problem, but those documents are either too low level law to be bindingor too broadly defined to be targeted practicing. The financing difficulty of SMEs hasnot been solved and it has been the biggest obstacles restricting their growth andexpansion. Therefore, many scholars have undergone a large number of researches onSMEs financing-the world-wide difficulty. Although they achieved a lot of researchresults, they mainly came from the discussion on the status quo and reasons forSMEs financing few documents or materials specified from legislative level.This paper attempts to discuss the status quo and reasons on China SMEsfinancing from the perspective of law and to put forward relevant recommendationsto alleviate this problem at the same time, among which the improvement on SMEsfinancing laws and regulations is a focus to discuss. We hope to provide some useful theoretical support to alleviate their financing difficulty from legal aspect. Mainlyfour aspects will be elaborated in this paper. The first part is on the definition for theconcept of SMEs and the status of law, which help analyze the importance of SMEsto national economy. Then it will analyze current China SMEs financing’s legalenvironment from the aspect of its main money sources and analyze the reasons ofSMEs financing difficulties. The third part is going to compare and learn fromAmerica, France, Japan and other developed countries’ financial support system forSMEs. The last part focuses on the new value and target, the legislative mode andframework for China SMEs laws and regulations according research results andbrings forward some personal thoughts and supplements for improving and perfectingthe legal system of China’s SMEs combined with foreign related systems, whichhopes that the discussion on SMEs financing problem can provide some help toalleviate their financing predicament.