Research On Financial Problems Of Rural Small And Medium-sized Enterprises In Wenzhou City

The development of Small and Medium-sized Enterprise(SME) is an importantfoundation of our country’s economic development and social stability, and core andfocus of our economic work. But the financing difficulty is always bothering thedevelopment of SME. And the situation is even worse in the rural areas where theinformation relatively isolated and development relatively lagged. With thedevelopment of market economy and the industrial level continues to increase, thedevelopment of rural SME is the core strength to “Construct New Countryside”,increase the income of farmers and creat more jobs for surplus workers. Therefore,the financing of SMEs in rural areas has become the primary problem.To effectively study the financing of SMEs in rural areas, the paper selectedWenzhou as an entry point. Wenzhou is the area where private economy is firstdeveloped in China, and the most enterprises of Wenzhou are SMEs. But as the samesituation as SMEs in other districts have, Wenzhou is also constrained by nationalfinancial policies and institutional constraints. Market economy and plannedeconomy in Wenzhou reflects a strong impact, while rural SMEs is representing thisconflict far more apparent. Therefore, the study on financing difficulty of Wenzhourural SMEs will be the most representative and have reference.In this paper, Wenzhou SMEs in rural areas are chosen as the research object.First, based on SME financing theory, the status of Wenzhou rural SME financing isanalysed, including the financing needs, sources of funding, loan principal and othercontent. The study found that when rural SMEs in Wenzhou are in inception, theymostly rely on their own funds, a few are rely on external borrowing. When theseSMEs are in development, most of them are rely on external financing, while a few are rely on internal financing. Because Wenzhou’s private lending funds are activeand rich, the external financing which Wenzhou SMEs rely on is private lending,rather than in other regions often rely on bank credit. Thus, it formed a worldwidefamous phenomenon called "Wenzhou Model". But also because of relying heavilyon private lending, Wenzhou private lending crisis in2011brought enormousdestructive foreshadowed.The reason is found in the analysis, although the Wenzhou market’s marketeconomy is well developed than other places, on the one hand, the SMEs inWenzhou also have same the weaknesses which SMEs in other districts have, suchas modern operating system is not perfect, opaque financial system, the credit levelis low, weak anti-risk ability, the information level is not high, and less collateralavailable; on the other hand, Wenzhou formal financial system is still subject toimperfect of national policy, credit system, guarantee system and other factors, cannot keeping up with changes in demand.In order to effectively solve the problem of financing difficulty of Wenzhourural SMEs, firstly, the related practice of the United States, Japan and South Koreaare studied, and then similarities and differences between countries are comparedbased on the basis of national conditions and characteristics. Then, combined withour national conditions and the basis of our existing policies and measures, thetargeted proposals from three countries, companies and financial institutions aregiven: the state should accelerate the establishment of relevant support laws,regulations and tax incentives for SMEs, establish and improve SME financingsystem, the introduction of Internet banking and other new financial situation, theprivate lending into the national financial system and credit system to promote ruralsmall and medium enterprises; financial institutions should closely respond tonational call, followed by a large national financial policy, continue to optimizefinancial services for SMEs, the introduction of flexible financial services for SMEs;SMEs also need to start do their best to continue to strengthen the competitiveness ofenterprises, and financial transparency, management system modernization make a clear request. In this multi-joint efforts to the maximum extent provided financialsupport for rural SMEs in Wenzhou, cracking the problem of financing.Based on the full study on financing status of Wenzhou rural SMEs, this paperdeeply analyzed the important role which private lending is taking and then putforward a detailed proposal how to formalized private lending. In addition, this paperis keeping up with the form of development in a timely manner to reflect the latestpolicies and measures at the national, and also introduces new forms of Internetbanking and financial financing insurance mechanisms, giving a new financingdirection to rural SMEs.