Research On SME Lending In China From Signaling Model Perspective

In Chinese current economic development, SMEs occupy a prominent position. SMEs in the creation of value, increasing revenue, technological innovation, in particular, the creation of employment opportunities, has an irreplaceable role in large enterprises. Our country is rich in labor and human resource, and only the full development of small and medium enterprises can play in Chinese comparative advantages, increasing jobs, to achieve rapid, sustainable development.However, the development of SMEs is facing many constraints and restrictions, for example, the policy of discrimination, the market access issues, the identity of treatment, but the main problem is funding. Due to lack of funding, many SMEs are unable to promptly seize the opportunity to expand the scale and improve strength and developmental delay. Accumulated its own limited financial resources of SMEs rely mainly on external financing. And the most significant financing is the bank loans. Therefore, to accelerate the development of SMEs, we must first solve the SME loans.What factors have contributed to small business loans difficult problem? There are many factors. In China, these factors include:the government does not pay enough attention to SMEs, support efforts are not high; the financial structure is irrational, the banking industry is a high degree of concentration; state-owned commercial bank reform is incomplete, lack of adequate incentives; small and medium enterprises are flexible in operation changing characteristics,which is contrary to sound business principles; when commercial bank lend to SMEs, the transaction costs is higher, the cost is difficult to control; SME management was not standardized, accounts, and even false, and so on. But the main reason is that there is a huge information asymmetry between commercial banks and SMEs.Information asymmetry causes adverse selection consequences. On the credit markets, commercial banks do not have the information that small and medium enterprises have, then commercial banks can only make an overall evaluation to the small and medium enterprises, and require a higher interest rate to compensate for the risk, the consequences of doing so can only be:those who credit the higher SMEs can not afford high interest rates and withdraw from credit markets, leaving only those SMEs with poor credit. For the commercial banks, such an outcome, in fact, is to further increase the risks. So, how to overcome the information asymmetry between the two then? Western economists put forward two main ways, namely, the signaling model and information screening. Signaling model runs in this manner:the party, which has information, take the initiative to send a signal of information to indicate characteristics of their own situation; Screening runs in this manner:the party, which does not have information, design a mechanism for the party with information superiority, then observer the choices of the party with information superiority to achieve the distinction and identification purposes.This article is the signaling model used in the theory. In this analysis, first, describe a case of the real economy, and then use the signal model to analyze the case, point out that the key of signaling model is that for different types of SMEs, the cost of sending a signal is different.And further discussion is that in a variety of conditions, for the signaling model, what changes will occur, and then draw the appropriate inferences. Finally, according to the conclusions and inferences of signaling model, give a number of specific recommendations and measures to achieve the resolution of information asymmetries and adverse selection problems.This paper is structured as follows:the first part is introductory, briefly explaining this problem to be solved and an overview of existing literature; the second part is to specify the status of Chinese small and medium enterprises and lending issues; the third part is a brief description of asymmetric information and the impact on SME lending; the fourth part is using the theory of signaling model to analyze the example thoroughly, and discuss the changes of the signaling model in variety cases; the fifth part gives some suggestions and countermeasures from the angle of signaling model.