The Analysis Of Development Strategy For SME Private Debt

To solve this tremendous problem for SMEs in China, which is hard to get financing and high cost of financing, and stimulate the growth of these enterprises, a brand new type of financing vehicle, SME private debt, come into exist under the guidance of China Securities Regulatory Commission (CSRC). It once was a popular financial product. After three years, it becomes redundant one and peripheral in the bond market. Will it fades out from bond market in China or gain a second life by summarizing failing experience? It stands at critical crossroad now.This paper starts from analyzing the features and development status quo of SME private debt by theoretical approach. By summarizing point of view of the market, I confirm it is redundant product in bond market. Then, by analyzing theory and real case, I generalize three disadvantage features of SME private debt, which are high risk of insolvency, less option for issuer and high cost of financing. These features are fundamental reason that impedes the development of it. Last but not least, specific to these features, I put forward two strategies, which are remaining conservative developing strategy or using brand new strategy. The first strategy keeps the feature of SME private debt. The second strategy suggests changing the scope of issuer for the bond and extending the range of issuer to all enterprises except for restricted industries by government. Comparing two strategies, first one does not solve the core problem, which is high insolvency risk of SMEs. And second one is not only beneficial to long-term development of bond market in China, but also to development of SMEs in China as well. It also accords with the guidance ideology of 12th five-year plan in China. So I choose second strategy as optimal one for future development of SME private debt in China.