SME financing in China: the current situation, problems and possible solutions

The determinants of capital structure: Evidence from SAARC countries

“…Due to strict credit requirements, firms are reluctant to borrow from financial institutions. They place higher weight to the factors such as future growth and take more items other than tangible assets (inventory, receivables) as collaterals (Fagan & Zhao, 2009).…”

Do Social Capital Building Strategies Influence the Financing Behavior of Chinese Private Small and Medium–Sized Enterprises?

“…Consequently, Chinese private firms, and especially SMEs, are generally discriminated against by the formal banking system (Allen et al, 2012;Allen, Qian, Zhang, & Zhao, 2012;Ding, Guariglia, & Knight, 2013;Guariglia, Liu, & Song, 2011;Poncet, Steingress, & Vandenbussche, 2010). Although they account for more than 55% of gross domestic product (GDP), they receive less than 20% of all bank lending (Fagan & Zhao, 2009). As for equity markets, they are still immature in China: Allen et al (2012) document that despite a market capitalization to GDP ratio of 64%, which is higher than the 58% average ratio for other major emerging economies, the Shanghai and Shenzhen Stock Exchanges have not been effective in allocating resources in the economy.…”

“…Chinese SMEs face significant difficulties in accessing external financing compared to their counterparts in mature economies as a result of limited access to equity markets and a lending bias from the state-owned banking sector towards larger state-owned enterprises and private firms (Allen et al, 2005;Ayyagari, Demirgüç-Kunt, & Maksimovic, 2010;Bai et al, 2006). Recent figures indicate that although private SMEs in China account for more than 55 per cent of GDP, they receive less than 20 per cent of all bank lending (Fagan & Zhao, 2009). These facts suggest that the predictions of the traditional theories of capital structure may not necessarily hold for Chinese SMEs.…”

The emergence of the private entrepreneur in reform era China: re-birth of an earlier tradition, or a more recent product of development and change?

“…66 For example, even though they account for the majority of domestic output, they receive less than 20% of bank financing. 67 In addition, equity markets are still immature and have not been effective in allocating resources in the Chinese economy. 68 In the last decade state-owned enterprises captured around 57% of the equity from capital markets, leaving a limited proportion to the private sector, especially small and medium-sized enterprises.…”