Study Of The Financing Preference Of Chinese SME

The SMEs have very important position in China’s national economy, but their financing situation is inconsistent with their important economic status. The financing difficulties of SMEs have obsessed China’s owners of SMEs and government for a long time.The thesis has a positive study on the SMEs’ financing environment and financing preference. At first, through contrasting with the foreign SMEs’ financing environment, the thesis finds that the Chinese SMEs have very limited financing channels which is restrained by China’s strict financial regulation in both direct finance and indirect finance. In the direct financing channels, the entry barriers are too high to achieve for the SMEs, and the debt financing instruments designed for SMEs are limited, which rely on the excessive government guarantee so that the marketization is inadequate. As for the indirect finance, the banking loan is hardly available for the SMEs, and the loan interest rates are too high. In the folk finance, the market of micro-credit company still need regulation, and the VCs need to expand their exit channels. Secondly, the thesis uses Ordered-Probit model to test the financing preference of SME board’s listed companies, and tests the internal influencing factors. The results show that the financing preference of SMEs is accord with the Pecking Order Theory, and the enterprise asset size, profitability, growth, the funding gap, sovency, ownership concentration has significant effects on SMEs’ financing preference. In the end, the thesis puts forward some policy suggestions on improving the financing environment of SMEs in China.