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SME finance in China. key trends in SME finance in China Major obstacles to improve SME finance Policy recommendations Current development. Key trends in SME finance in China. Contribution by SMEs number 99% output 50% export 60% tax 30% jobs 70%.

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sme finance in china
SME finance in China
  • key trends in SME finance in China
  • Major obstacles to improve SME finance
  • Policy recommendations
  • Current development
key trends in sme finance in china
Key trends in SME finance in China
  • Contribution by SMEs

number 99%

output 50%

export 60%

tax 30%

jobs 70%

key trends in sme finance in china3
Key trends in SME finance in China
  • Limited or little access to capital market
  • Share of credit in main banking financial institutions: 16%
  • High NPL ratio compared to corporate lending
  • High reliance on internal and informal finance channel
key trends in sme finance in china4
Key trends in SME finance in China
  • SMEs funding problems
  • 66% of sample SMEs have difficulty to access to finance
  • The lack of funding is the main blockade to the developments of SMEs (IFC-CPDF survey)
  • Similar findings from various surveys as presented by Dr. Xu and Shen
major obstacles to improve sme finance
Major obstacles to improve SME finance

Macro obstacles:

  • Capital market lacks function of financing especially for SMEs
  • Insufficient competition in banking sector
  • Interest rate cap until recently
  • Address SMEs finance as a social objective, not a commercial business: Can SMEs afford high IR?
  • unfriendly social, legal, and credit environment
major obstacles to improve sme finance6
Major obstacles to improve SME finance

Micro obstacles:

  • Banking Inst. lack of core credit tech.
  • Credit culture and credit mgt. policy not adaptable to SME lending
  • Information asymmetry
  • Poor corporate governance
policy recommendations
Policy recommendations
  • Develop capital market
  • Increase the level of competition of the banking sector, push for down-market, more banking establishment
  • Promote commercial viability of SME lending: new way of thinking
  • Remove IR cap
  • Improve social, legal and financial infrastructure
policy recommendations8
Policy recommendations
  • Improve corporate governance
  • cultivate right credit culture and advocate institutional reform in credit area: talents and risk-based pricing
  • Capacity building in banking sector for SME lending
  • SMEs more open to lenders
current development
Current development
  • Credit guarantee schemes
  • public and private owned: 4,000
  • guarantee capability
  • funding resource
  • Banks suspicion on CGSs
  • Overall efficacy limited
  • Controversy over the effect of CGSs
current development10
Current development
  • Lending rate cap removed by central bank in Sept. 2004
  • Pilot-trial project of lend-only MFIs in several provinces
  • Guideline on MSE Lending of Commercial Banking Inst. In July, 2005: a major revolution in introducing commercially sustainable MSE lending and promoting institutional and product innovation
current development11
Current development
  • Credit bureau
  • Improve legal infrastructure: Law on property, Law on bankruptcy, etc.
  • Gov. at local levels come to help improving the social and credit environment