Private Finance And Medium-small Enterprises's Financing In China

Since the reform and opening, China has been making rapid progress in the development of the medium-small enterprises. The medium-small enterprises are the impetus of economic growth and will play more and more important role in the future. But shortage of funds and difficulty of financing are the main problems to restrict their development. Analyzing the situation of the medium-small enterprises and the causes of financing trouble, this thesis thinks that it is the result of both intrinsic and exterior causes. The intrinsic factors are the small scale of the medium-small enterprises, the serious problem of asymmetric information and the feature of the loans which are small scale with high frequency. These factors cause high transaction cost. The exterior ones indicate that the market of direct financing is not mature in China by now. State owned banks are reluctant to provide loans to the medium-small enterprises for one cause or another, meanwhile, private financial is institutes are less developed in most regions of our country. Applying the theories of information economics, this thesis sets up a mathematic model under the asymmetric information. It shows how the state owned banks make different strategies of loan to large enterprises and medium-small enterprises as well as the situation after introducing private financial institutes. Conclusion by follows could be drawn: Developing private financial.market will increase loan amount of the medium-small enterprises; and the amount will be higher if the capital scale of the medium-small enterprises is larger as well as more information advantages. Comparing the city of WenZhou to other regions of China where the medium-small enterprises and private financial market grow rapidly and healthily, this thesis indicates, the advantageous of private finances for the medium-small enterprises. Developing private finance is the fundamental way for their financial problem. With regard to the asymmetric information and the characteristics of the medium-small enterprises. The author gives detail measures such as standardizing their development and perfecting the system of control and supervision of the private finances' growth.