A Study On The Impact Of Shadow Banking On The Financing Constraints Of SMEs In China

SMEs play a pivotal role in the development of China,and have an extremely important impact in solving the employment of the unemployed,promoting China’s economic development and encouraging technological innovation in enterprises.However,as the construction of China’s market economy system progresses and competition in various industries intensifies,the small scale,low creditworthiness and non-transparent financial situation of SMEs have made it difficult and expensive for them to raise funds,which has caused great problems to their development.In recent years,China’s shadow banks have developed rapidly,relying on financial and non-financial intermediaries to give SMEs financial support without regulatory constraints,improving the efficiency of capital use and promoting the development of SMEs,thus contributing to the development of the social economy.Against this background,it is therefore important to study the impact of shadow banking on SME financing in China.The existing literature in China categorizes shadow banks differently,and the research perspectives on shadow banking on SME financing are different.This paper will analyse in depth the impact of different shadow banks on SME financing based on the definition of shadow banking in the existing literature,in order to improve the missing corner of the existing literature.This paper firstly for reviewed the existing literature and reviewed the literature research related to shadow banking and SMEs,analyzed the mechanism of shadow banking for SMEs,screened trust loans,entrusted loans,undiscounted bank acceptance bills and private lending as components of shadow banking according to the existing research,and took into account the uneven regional development.For the development and correlation between the two,an empirical analysis was conducted,based on a cash-cash flow sensitive model,with the development of shadow banking and corporate free cash flow as explanatory variables,corporate growth opportunities,gearing ratio,working capital changes and corporate regulation size as control variables,and corporate cash value added as explanatory variables for the study.Finally,the following conclusions are drawn:(1)shadow banking can alleviate the financing constraints of SMEs to a certain extent;(2)Entrusted loans and private lending can significantly ease the financing constraints of SMEs,while trust loans and undiscounted bankers’ accepted bills in the shadow banking of financial institutions are not good enough to ease the financing constraints of SMEs;(3)there are significant differences in the mitigating effects of shadow banking for state-owned and private enterprises,for eastern and midwestern,and for manufacturing and non-manufacturing industries;(4)shadow banking can alleviate the financing constraints caused by high-risk enterprises,especially Shadow banks can alleviate the financing constraints caused by high-risk enterprises,especially entrusted loans and private lending.According to the above results,private finance promotes SME financing and is effective,while shadow banking by some financial institutions is less effective in promoting the development of SMEs but increases the risk,and therefore should be regulated by category.Based on this,the paper argues that a sound regulatory system for shadow banking and corresponding laws and regulations should be developed in the credit market,and that a favourable financing environment should be provided for SMEs.