Small and medium-sized enterprises (SMEs) have played an important role in
the development of China's economy. As of the end of 2004, SMEs accounted for
58.5 percent of the country's GDP (gross domestic product), 66 percent of patent
rights and 74 percent of technology innovation, according to Li Jun,
vice-president of the Export-Import Bank of China. They developed 82 percent of
the country's new products and made up 68.3 and 69 percent of total exports and
imports respectively.
However, SMEs face a lot of barriers to further development, with financing
being one of the biggest problems. The enterprises usually have limited capital,
so they need capital from other sources, one of which is banks. But only 10
percent of the businesses have received bank credit, Li said recently at the
Dialogue Between Fortune 500 and APEC SMEs in Qingdao City, East China.
Li said China Eximbank, a major State policy bank, has taken a series of
measures to promote the development of SMEs since the end of 2005. These steps
include providing more direct loans, establishing special financing platforms
and giving more authority to local branches to approve SME loan applications.
The lender has also implemented a pilot program in Anhui Province, East China,
to grant loans to small businesses.
Another major lender, the Agricultural Bank of China, also vowed to give more
financial support to SMEs. Zhang Yun, the bank's vice-president, said they will
increase effective input in SMEs, especially those of high quality.
Zhang said loans to SMEs will account for no less than 60 percent of the
agricultural bank's new loans beginning in 2006. He said the bank will also
reduce their requirements and simplify loan-extending procedures based on the
actual conditions of small and mid-sized companies in different regions and
industries and at various levels.
Li from Eximbank called on SMEs, to step up credit construction so as to win
more support from banks, citing dishonesty as a major element that greatly
hinders enterprise growth.
Many bank executives at the forum echoed Li's opinions, agreeing that bad
credit systems are one of the main barriers to SME development. Among them were
Li Jun, vice-president of Bank of Communications, and a Standard Chartered Bank
executive responsible for China.
The executive from Chartered Bank, a foreign lender with 148 years of
experience in China, said three factors impede banks from extending loans to
SMEs. First, it is difficult for lenders to evaluate and control loan risks to
SMEs due to the lack of information on businesses. Second, single loans to these
companies are usually small, resulting in a low yield for banks. Third, banks
are, more often than not, not confident of SMEs' repayment
abilities.
(For more biz stories, please visit Industry Updates)
