Legal Supervision Of Financing Guarantee Corporation

In China, while small businesses make great contribution to facilitation of economic growth, creation of jobs and stabilization of society, refinancing has been one of the important factors that prevent small businesses from growing further. Any firms could not operate normally without adequate capital. That is, capital is a prerequisite for business operation and market expansion. Therefore, it is inevitable for small businesses to demand refinancing because of the lack of capital. Small businesses, however, are limited to obtaining direct loans from conventional financial institutions as a result of their insufficient credit scores caused by several factors, such as shorter duration of establishment, smaller capital scale, poorer management and weaker technology.When small businesses face these challenges, financing guarantee companies play a crucial role on coping with the dilemma in regards to the refinancing of small businesses, especially for high-tech firms. Although these financing guarantee companies greatly alleviate the extent of difficulty for small businesses to refinance, issues still arise since many financing guarantee companies in China are still young, compared with their mature counterparts in western countries.Under the situation where the Chinese financial watchdog has not regulated the financing sector properly and financing guarantee companies has been expanding rapidly since it emerged, these financing guarantee companies have turned to deteriorate, resulting in many cases of violations of laws and rules.Nowadays, not only does there exist many legal loopholes in the financing guarantee industry, violations of proper regulations also lead to instability of the financing guarantee industry. Therefore, perfecting related laws and rules is essential. This article, by studying relevant theories regarding surveillance of financing guarantee companies and linking with issues of financing guarantee companies, demonstrates potential solutions to solve issues of financing guarantee companies, strengthening the watchdog’s supervision ability of financing guarantee companies.