China strengthens measures for SME development

China is stepping up efforts to help small-and-medium-sized enterprises broaden their financing channels, an issue that has been hindering the expansion process for many mainland SMEs With direct financing channels becoming more accessible to SMEs, problems still exist.

Lin Qingde is a small business runner. His company just received a loan of 500,000 yuan, or more than 65,000 US dollars, from a bank at the China International SME Expo held last week in the southern province of Guangdong.

"We are a small firm. Five hundred thousand yuan is a big amount for us to raise. After we learnt that the banks were issuing micro loans to small and medium sized enterprises, we applied for it. It has helped us a lot."

In fact, it is also helping the Chinese economy as small-and-medium-sized firms account for more than 99 percent of the mainland's total companies.

According to the country's top planner, the National Development and Reform Commission, the 42-million-plus SMEs contribute 60 percent of China's total output value, 50 percent of tax payments and 60 percent of the country's export volume.

Wang Zhaoxing is the Assistant Chairman of China Banking Regulatory Commission.

"I believe the development of SMEs also offers business opportunities for commercial banks."

But that's not been acknowledged until the recent years as the mainland's commercial banks have long been targeting big enterprises, considering them as less risky clients.

Yang Kaisheng, President of the Industrial and Commercial Bank of China, or ICBC, China's largest lender by assets, made the comment in a recent interview with China Central Television.

"As the ratio of direct investment and indirect investment continues to change, an increasing number of big enterprises start direct financing of their own. Therefore, we also have to find new channels to develop our business."

According to a report carried by Chinese newspaper Financial News, by the end of June, over 530,000 SMEs were granted loans by five major Chinese commercial banks, including the ICBC and Bank of China. That's an increase of more than 2 percent from the beginning of the year.

The loan value amounted to over 200 billion US dollars by June, up eight and half percent from the end of last year.

But such an increase is barely enough, according to Dr. Charlie Chan, President of the Hong Kong SME Development Association.

"The problem is that second tier financial institutions for the SMEs is only in the experimental stage. It means they are not mature, sophisticated enough to cope with SME finance at the present moment. The first tier refers to the banks. The second tier refers to borrowing companies, the investment companies and the guarantee companies and the mortgage companies".

He also calls for the SMEs to make a better use of the direct financing channel of the stock market.

Earlier, Vice-Minister of the State Development and Reform Commission Ou Xinqian has said the government would step up efforts to facilitate SME listing.

"Next, based upon institutional innovation, we will improve the operation of the SME board at the stock market to expand direct financing channels for different SMEs at different stages."

The Commission, together with four other authorities including the Ministry of Finance and the State Administration for Industry and Commerce, will also issue comprehensive supporting policies to promote the development of SMEs.

Measures include liberalizing and standardizing market access of SMEs, improving financial services to promote the construction of SME credit system, and further promoting technological innovation and talent development and improving IPR protection system to stimulate SMEs' enthusiasm in business startup and technological innovation.