Addressing financing difficulties for SMEs

Date : 2015-05-25  | From : Xinhua

Small-and-medium sized enterprises or SMEs have long been known for big tax and jobs contributors but short of funding. The fact is that difficulties of SME financing is huge and real.

Supporting China's manufacturing industry means helping SMEs get more funding. According to the China Association of Small and Medium Enterprises, bank loans cover more than 90 percent of large enterprises, while loans to smaller companies accounts less than 10 percent.

"In an overall perspective, large enterprises are the largest recipient of capital investments in China. Adding that China is undergoing industrial transformation and production overcapacity, banks are more cautious to lend money, which makes it even harder for SME financing," said Zhang Xiaoqiang, Vice President of China Center for International Economic Exchanges.

Not all small and medium sized enterprises are feeling the same pain. Capital flowing into SMEs in the service sector and emerging industries is acturally increasing. While SMEs of traditional manufacturing companies are worst hit by financing difficulties. To tackle the issue, analysts say traditional manufacturing companies should include more sources of funding.

Zhang Xiaoqiang said:"These SMEs should enlarge their involvement in the capital market to tackle the issue of financing difficulties. They can obtain investments from issuing corporate bonds , establishing enterprise development funds or issuing stocks."

The structural issues causing SMEs financing difficulties cannot be solved via short-term policy adjustments. Policy makers may need to issue preferencial measures to help SMEs get capital.