Tackling Small and Medium-Sized Enterprises (SMEs) Financing in China

W. Lam () and Yan Liu
Additional contact information
W. Lam: International Monetary Fund
Yan Liu: World Bank

Annals of Economics and Finance, 2020, vol. 21, issue 1, 209-239

Abstract: China's small and medium enterprises (SMEs) have contributed to growth and created millions of jobs. However, SMEs are frequently perceived as facing financing difficulties. This paper illustrates that (1) financing difficulties are more acute in smaller cities; (2) spreads between SMEs and large enterprises appear higher in part due to implicit fees and charges by banks and higher credit risks for SMEs; and (3) greater financial penetration in small cities could reduce the financing cost. These findings could help formulate policies to support SME financing. Strengthening financial inclusion with safeguards, particularly in small cities, could bring significant gains. Measures to build a sound financial infrastructure would improve credit to SMEs, including unified credit registry and extending eligible collaterals. Broadening sources of finance by taking advantage of technology—provided with adequate supervision—and addressing implicit guarantees could help SME financing.

Keywords: China; Small and medium-sized enterprises; SME financing; Credit registry (search for similar items in EconPapers)
JEL-codes: E4 G2 G3 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2020:v:21:i:1:lamliu

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