Financing Difficulties and Structural Characteristics of SMEs in China.pdfVIP

34 China World Economy / 34-49, Vol. 12, No. 2, 2004 Financing Difficulties and Structural Characteristics of SMEs in China Yanzhong Wang* Abstract China’s reform and opening-up policy has created a good environment for the development of small- and medium-sized enterprises (SMEs), especially the burgeoning SMEs in the private sector. In the meantime, SMEs have been playing an important role in China’s economic reform and development and, to some extent, have become a growth engine in the Chinese economy. However, SMEs are still facing many financial difficulties due to various reasons, such as lagging in the banking system, an inadequate financial structure, lack of a guarantee system, etc. This paper will analyze the structural roots of SMEs financing difficulties and put forward possible measures to mitigate such financing obstacles. Since China’s reform and opening up, the market-oriented reform of the country’s economic system has gradually engendered labor and capital markets, which have promoted an organic combination of rich labor resources and increasingly expanded capital resources. The development of SMEs, especially the sharp rise in non-state- owned and non-public-owned enterprises, have provided a vast space and permanent vehicle for this type of combination. Although the overall size of the state-owned economy is still increasing in terms of number of enterprises and developmental potential, non-state-owned SMEs have become a main part of the Chinese economy and played an increasingly important role in the national economy and social development. * Yanzhong Wang, senior fellow, Bureau of Scientific Research, Chinese Academy of Social Sciences