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Small, Micro-Enterprises Need Specific, Suitable Support

Data Analysis 09:20:49AM Feb 21, 2012 Source:SMM

BEIJING, Feb. 20 (Xinhuanet) -- China has set its sights on promoting small and micro-sized enterprises (SMEs) development this year, and experts said what those enterprises need is specific and suitable support.

Small firms play an irreplaceable role in fostering economic growth, increasing employment, facilitating scientific and technological innovation and maintaining social stability. However, they bear the vulnerabilities such as limited size, weak influence and the lack of resources.

In face of the uncertainty of the market and economic development, small and micro-sized enterprises need more effective support from the government to survive and develop.

Making through difficulties

Since last April, Wenzhou, an economic hub in Zhejiang province known for its successful entrepreneurs, has been hit by a severe debt crisis.

Many SMEs have been forced to turn to the high-interest underground lending market, as they couldn't get bank loans after inflation-combating government tightening measures put a brake on lending, and could not repay the loans due to bad economic conditions and investment losses either.

The government has taken measures to help private firms weather the crisis, including allowing banks to lend more money to small firms and tolerate higher levels of debt.

On Dec. 5, the central bank cut the reserve requirement ratio for lenders by 50 basis points for the first time in three years in order to ease banks' credit crunch.

The central economic work conference held last December emphasized that China will preset or fine-tune its monetary policy according to changes in economic development, employ multiple monetary policy tools and maintain a reasonable increase in its money and credit supplies.

According to a multi-department investigation conducted in southern China's Guangdong Province and the eastern provinces of Zhejiang and Jiangsu at the end of last year, the crisis has largely been kept under control.

New support put forward

Shang Fulin, chairman of the China Banking Regulatory Commission (CBRC), said that regulatory bodies should urge small and mid-sized banks to strengthen risk controls and give special support to small and micro-enterprises.

"Commercial banks should follow a differentiated and characteristic development route... and emphasize support to small and micro businesses," Shang said.

Zhao Xijun, a finance professor at Renmin University of China, believed the government's relief measures should be implemented effectively in order to help small firms in the real way, and Shang's statement indicated further support from the banking industry.

Shang also urged deeper reforms in the management system to improve the banks' risk assessment abilities.

China's small and mid-sized commercial banks include 12 national joint-stock banks and 144 municipal commercial banks.

By the end of December last year, the total assets of the 12 national joint-stock banks had reached 18.32 trillion yuan (2.91 trillion U.S. dollars), accounting for 16.4 percent of the country's entire banking industry, while that of the 144 municipal banks 9.98 trillion yuan, taking up a 9-percent share in the sector.

However, banking industry alone cannot meet the needs of all those enterprises for its own concerns about risks and return. Governments need to be more involved, and provide long-term mechanism for the sustainable development of small firms.

A famous financial expert Li Ke also believed that the governments should learn from some developed countries, and provide the small and micro-sized enterprises with more specific and suitable measures.

In the end, besides the help from the government, small and micro-sized enterprises also need to fight on their own to face the challenges and make innovations in order to survive in the tough market environment.

Only when both the measures and the enterprises themselves function well can a virtuous circle being created.

 

Key Words:  SMEs  government support 

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Small, Micro-Enterprises Need Specific, Suitable Support

Data Analysis 09:20:49AM Feb 21, 2012 Source:SMM

BEIJING, Feb. 20 (Xinhuanet) -- China has set its sights on promoting small and micro-sized enterprises (SMEs) development this year, and experts said what those enterprises need is specific and suitable support.

Small firms play an irreplaceable role in fostering economic growth, increasing employment, facilitating scientific and technological innovation and maintaining social stability. However, they bear the vulnerabilities such as limited size, weak influence and the lack of resources.

In face of the uncertainty of the market and economic development, small and micro-sized enterprises need more effective support from the government to survive and develop.

Making through difficulties

Since last April, Wenzhou, an economic hub in Zhejiang province known for its successful entrepreneurs, has been hit by a severe debt crisis.

Many SMEs have been forced to turn to the high-interest underground lending market, as they couldn't get bank loans after inflation-combating government tightening measures put a brake on lending, and could not repay the loans due to bad economic conditions and investment losses either.

The government has taken measures to help private firms weather the crisis, including allowing banks to lend more money to small firms and tolerate higher levels of debt.

On Dec. 5, the central bank cut the reserve requirement ratio for lenders by 50 basis points for the first time in three years in order to ease banks' credit crunch.

The central economic work conference held last December emphasized that China will preset or fine-tune its monetary policy according to changes in economic development, employ multiple monetary policy tools and maintain a reasonable increase in its money and credit supplies.

According to a multi-department investigation conducted in southern China's Guangdong Province and the eastern provinces of Zhejiang and Jiangsu at the end of last year, the crisis has largely been kept under control.

New support put forward

Shang Fulin, chairman of the China Banking Regulatory Commission (CBRC), said that regulatory bodies should urge small and mid-sized banks to strengthen risk controls and give special support to small and micro-enterprises.

"Commercial banks should follow a differentiated and characteristic development route... and emphasize support to small and micro businesses," Shang said.

Zhao Xijun, a finance professor at Renmin University of China, believed the government's relief measures should be implemented effectively in order to help small firms in the real way, and Shang's statement indicated further support from the banking industry.

Shang also urged deeper reforms in the management system to improve the banks' risk assessment abilities.

China's small and mid-sized commercial banks include 12 national joint-stock banks and 144 municipal commercial banks.

By the end of December last year, the total assets of the 12 national joint-stock banks had reached 18.32 trillion yuan (2.91 trillion U.S. dollars), accounting for 16.4 percent of the country's entire banking industry, while that of the 144 municipal banks 9.98 trillion yuan, taking up a 9-percent share in the sector.

However, banking industry alone cannot meet the needs of all those enterprises for its own concerns about risks and return. Governments need to be more involved, and provide long-term mechanism for the sustainable development of small firms.

A famous financial expert Li Ke also believed that the governments should learn from some developed countries, and provide the small and micro-sized enterprises with more specific and suitable measures.

In the end, besides the help from the government, small and micro-sized enterprises also need to fight on their own to face the challenges and make innovations in order to survive in the tough market environment.

Only when both the measures and the enterprises themselves function well can a virtuous circle being created.

 

Key Words:  SMEs  government support