A Study Of SME Financing Difficulties In China

Small and medium-sized enterprise (SME) is the cornerstone to promote national economy development as well as social stability. For a long time, the role of SMES is ignored, has been the unsung hero role.At present, China's SMEs are playing an increasingly important role in the following aspects, including ensuring moderate economic growth, alleviating employment pressure and adjusting economic structure. China's SMEs are experiencing severe problems currently in their production and operation because of their financing difficulties, the adjustment of China's economic structure, the decline of export. In brief, China's SMEs are hindered by their limited scale, capital deficiency and financing capacity.This paper firstly analyzes some paradox phenomena in SME financing. Although China's total financing scale and household savings expand year by year, the financing circumstance for SME in China has not been improved. The borrowing will of large enterprises was not so strong; however loans arbitrarily flowed into them. On the contrary, SMEs in China felt severe hungry of money but it was difficult for them to seek loans. Although private capital pool has expanded consecutively and idle money malicious speculation endangered national economy recently, China's SMEs in need of money still get none help. Along with high-profile support by local governments as well as repeatedly introduced policies, more and more SMEs in China have closed down repeatedly.Money is not lacked of in China's financial markets, so does the liquidity. Based on this case, the only reason for China's SME financing difficulty is that the resource allocation system and financial system in China go wrong. This paper firstly analyzes the external factors affecting SME financing, including the impact of interest rate formation mechanism, the influence of information asymmetry, impact of the current operating mechanism of financial institutions in China, difficulties of policy implementation to support SME financing, and challenges for transformation of private capital and household savings into SME investment. In terms of internal factors, this paper analyzes the defects of SME own property, uncertainty of SME financing activities, and defects of essential conditions of SME financing. Based on the above analysis, this paper puts forward several related policy suggestions for China's SMEs to solve their financing difficulties. These policy suggestions involve interest rate which reflects price of funds, and three participants in financial markets, namely, governments, financial institutions and SMEs.Considered from global perspective, SME financing problems are difficulties emerged in marketization process of interest rate. They can only be solved by market forces. First of all, governments should actively guide SMEs'development, improve all kinds of laws, regulations and safeguarding measures to support SMEs, create long-term stable financing platforms for SMEs, and strengthen supervision so as to prevent various financial risks. And then,all kinds of financial institutions should also change their operating mode in order to better serve for SMEs. At last, SMEs should also improve their management level, make full use of the advantages of innovation and technological advantages, and broaden financing channels to solve their financing problems.