A Practice Of Exotic Arrangements For Chinese SMEs Financing

Small and medium sized enterprises (SMEs) have long been playing an importantrole in the modernization process of China, but financing difficulty has increasinglybecome an inevitable and unavoidable factor constraining their further development.In this paper we describe the situation of SMEs in China and the main issuesconcerning SMEs financing. We find it easier for domestic SMEs to pursuefinance from abroad than from home under the present circumstance. Facing somedifficulties and discriminations at home, it might be wiser for Chinese SMEs toboldly stride towards overseas capital markets and take advantages of variousfinancing instruments from abroad, while it is still urgent for the domesticauthorities concerned to improve the SMEs financing system and environment athome. We introduce some valuable experiences of foreign arrangements before weput forward the suggestions on how both governments of different levels and SMEswith various backgrounds could do in order to promote Chinese SMEs' financingprogress. On the one hand, from the view of Chinese SMEs, we study anapplication of some feasible international financing channels, which we believe willbe efficient in assisting the companies to circumvent local obstacles and expand in awider scope for their financing need. On the other hand, we recommend togovernments and authorities concerned a series of measures and suggestions topromote the task of financing SMEs.The paper is divided into five parts. In Part I, SMEs are defined in views of some typical countries, followed by a description of the development of SMEs in China. The study shows that the companies have to face barriers in securing financing, tight credit constraints and limited accesses to private finance. In Part II, it shows that Chinese SMEs' financing situation, including main problems, major financing modes, financing difficulties and reasons. In Part III, some foreign advanced experiences and financing arrangements are introduced, concerning their financing systems, capital markets, commercial bank systems, government supports, insurance system, regulation and monitoring systems, etc. In Part IV, some feasible international financing channels for Chinese SMEs are studied because the well-experienced international platform is thought helpful to SMEs especially for their development. In Part V, in sight of the macro-environment, some proposed measures and suggestions are presented to reform the current financing system so as to facilitate SMEs for their financing need.