Case Study On Guangzhou SMEs’ Collection Notes

Since the reform and opening up, China’s economic has a rapid growth, and the SMEs inChina has made a signigicant contribution, especially in Yangtze River Delta region and PearlRiver Delta region, it plays a important role in these aspects such as prosperity economy,increase employment, prompt technology creative. But in a long time, indirect financing is stillthe mainly part in China, and there are lots of disadvantages in the financing of SMEs. In2008,SMEs’ collection notes organized by the People’s Bank of China and Dealers Association ofChinese inter-bank market is the “bundling” cluster financing bonds, which solves the problemof financing of SMEs.In November2009，the first set of SMEs’ collection notes was successfully issued andlisted on the inter-bank bond market ande it becomes a new debt financing choice for SMEs.Currently all over the country do the pilot work and gradually issue their own SMEs’ collectionnotes.As the first SMEs’ collection notes in Guangdong, the rating of Guangzhou SMEs’collection notes is AAA, and the interst of the notes is3.55%, which is the lowest in China. Thispaper sets the Guangzhou SMEs’ collection notes as study objection. First the paper gives theintroduction of the development of SMEs’ collection notes in our country. Also we introducethe program of SMEs’ collection notes, including selecting companies, consulting, credit rating,credit enhancement, product design and issue. Second the paper deeply studies on the twoimportant problems in the operational processes of SMEs’ collection notes——the selection offinance companies and credit enhancement. Financial condition, credit status, industry andpolicy need to be considered when select the companies. Credit enhancement uses the methodof guarantee–a counter-guarantee to improve the credit rating of the Notes and reduce thefinancing costs. Then the paper analyzes the innovation and shortcoming of the case.Based on the analysis of the Guangzhou SMEs’ collection notes, we give some suggestionson how to improve the design of SMEs’ collection notes, Which include reducing the risk by anumber of ways, improving credit enhancement, creating a new form of SMEs’ collection,promoting the development of guarantee markets,etc. We hope these suggestions will use forreference for the development of SMEs’ collection notes in future.