Dissertation > Economic > Economic planning and management > Enterprise economy > A variety of enterprise and economic > Small and medium-sized enterprises, township enterprises

A Study on the Dilemma of China’s Small Business Finance

Author YinZuoYue
Tutor ChenYeHua
School Southwestern University of Finance and Economics
Course Finance
Keywords the Delimma of China’s Small Business Financethe Relationship between Investers and Financiers Durable Cooperation
CLC F276.3
Type PhD thesis
Year 2012
Downloads 12141
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It is undoubted that small and medium sized enterprises (SMEs) contribute very much to a country’s economy:SMEs bear the most important role in one country, whatever from the growth of GDP, the push of employment and the technology innovation, the SMEs play the most important part. All the economy results, both from foreign countries’several ten years economy growth and from China’s thirty years’opening and reforming economy, have tested this point repeatedly. However, the problem of SMEs finance is always a big problem preventing SMEs’development. China’s SMEs finance problem not only has other popular funding availability SMEs finance problems, but also has the problem of SMEs finance relationship sustainable.For such a long time, China’s SMEs lack of credits, the banks fear loans to SMEs, cut loans to SMEs, information asymmetry, the banks and SMEs’relationship is bad. China’s SMEs finance problem always has some problem of development and sustainability. However, Japan’s and Germany’s financial system set up a good relationship with small businesses, which both have an indirect financial system like China. In US, there are thousands of community banks serve the SMEs, the mode of relationship loan is admitted both by economics and bankers, although US has a big direct financial system. In China, the states owned financial system has both scale and system discrimination to SMEs, and the SMEs often default. The cooperation between financial system and SMEs is always a word, it is always a zero game in the real economy. So, the paper do a study on the Delimma of Small Business in China, based on the relationship between investors and debtors.The thesis is based on economic person assumption, limited ration assumption, SMEs finance restrains assumption, enterprise life circle (ELC) and the theory of small enterprise finance growth circle. And the thesis analyzed the relationship between SME’s and financial system from the microeconomic\macroeconomic and system economic tools and theories.In microeconomics, the thesis talk the game theory and constrains\incentive mechanism between SME’s and financial system, in system economics; the thesis talk about the SME’s financial support system and the financial system reform related to SME’s finance; in macroeconomy, the thesis talk about the SME’s and economy development\the SME’s finance environment. The thesis analyze the SMEs’and banks’incentive and demand for a good relationship:to determine the game. Then, solve the game and test it in a metriceconomy model. The thesis got the Nash answer and the inter-relation between the China’s economy development. The thesis point out the credit value is important to SME and financial system cooperation; the financial system reform related to the SME’s finance; the thesis talks the SME’s finance environment as the ending.The first chapter introduce the base and study frame of the thesis, the topic’s research meaning, the assumptions; the contents\the research tools and innovations of the thesis.Chapter two is the literature review part of the thesis. The thesis did a review of western small business finance theories:the small business finance gap, credit rationing theory, agent theory, small business finance cycle theory. The thesis made a detailed review on relationship loan\small banks theory\small business credit management, as the support of western countries SMEs and financial institutions relationship.Then the thesis did the review on China’s past ten years research of the delimma of China’s SMEs finance, and the relationship between financial instituions and SMEs in China. The thesis makes detail conclusions on each trifle, in order to show what the thesis learn from those good papers.Chapter3analyzes financial institutions’and SME’s demand for a durable cooperation on the base each party is an independent economic person.. In the theories related to SMEs including:enterprise life cycle theory and small business finance cycle theory.Those related to financial system including:financial intermediation theory,the relationship between the financial medium, commercial banks risk management and finance development theory. The thesis point out that under financial constrain, the financial system and SME’s both want to find economic rent; and both want to develop themselves. So, it is a double win.Chapter4analyzes the reasons of bad relationship between SME’s and financial systems. Including:the SME’s qualifications, the banks traditional running and management, credit rationing, unsymmetrical information, the system problems.Chapter5gives out formal rational reasons to the delimma of China’small business finance and the unsustainable financing relationship. The chapter first gives out a game model to explain the SMEs and commercial banks cannot cooperation by themselves. And the uncooperation results in the delimma of China’small business finance. Then this chapter gives out the cases from Dongguan and Wenzhou to show the correct of the model:if the macroeconomy can develop very well to provide enough good projects, the SMEs credit can get development. And the SMEs finance also needs government support.At last.the chapter tests the model using the18small banks’profits and local GDP\unemployment, gets the conclusion:the small banks profits is related to the local GDP, the small banks profits contributes to GDP. So, the mall business finance is a part of financing industry. The cooperation between the SME and financial system is possible under some financial constrain.Chapter6points out the key problem of small business finance:the SME should turn their credit value to true. The old credit system under state owned economy does not accept the SME credit. Then the chapter gives out the methods to valuate the SME credit:the SME credit scoring system, the SME credit guarantee system, commercial banks’credit risk management, and the problems of the methods in China. The chapter introduces several new tools in SME credit risk management:credit scoring, financial analysis, complicated financial tools etc. And the Chapter analyzes the credit risk in Yunnan commercial banks. In the end of the chapter, the thesis introduces the SME credit supporting system in US, European, Japan and Korea.Chapter7from the investors aspect to slove the delimma of China’s small business finance and talk about the investors need to develop a good relationship with SMEs.. This Chapter points out that under the background of economy development, the bank has the demand and big incentive to develops a good relationship with SMEs. The banks will not do charity to SMEs again.The banks can make money from financing small businesses. The banks and SMEs are equal market unit.The chapter also introduces US, European, Taiwan’s SME and banks’relationship dealing ways. The chapter analyzes a relationship loan’s case in game theory:Kunming credit union’s relationship loan case.The thesis introduces the case management and development conditions which involves three parties in it.The model solved each party’s utility function and economic profit.Chapter8gives out the suggestions about developing a good relationship between SME and financial system’s environment construction. Including:credit environment construction, financial environment construction, and culture and society environment construction.The thesis draws the basic conclusions as following:the SME and financial institutions develop a durable cooperative relationship is from their economy person incentives, and the relationship also matches the China’s economy development. Under the donditions of the financial system reform, developing SME qulifications, developing the financial institutions service ability the sustainable cooperation can be turned in true. And this durable cooperative cooperation can solve the delimma of China’s SME financing problem. And the small business finance as a part of financial industry can contribute to the economy.There are following possible innovations of the thesis in the following:1. The thesis sets up a game model under macroeconomy development and test the model.The thesis sets up four empirical regress equations to test the SMEs finance itself and SMEs credit’s relation to macroeconomy.lt shows that SMes finance is a kind of finance and good to ecnomy development.2. The thesis give out a theory frame of "relationship", which is related to "transaction". The model is under professor Philip Dybvig’s advice.Here the relationship is in a relationship loan case in China. The model gives out three parties’s economy relationship and each party’s economic profit.3.In the study tools, the thesis considers the micro unity reform with the macro economy development. SMEs and commercial banks are both independent economic person in the game.The thesis considers SME’s each life cycle step’s finance demands and funds supply, also considers the finaicial intermediation’s theory the relationship between financial medium and debtors.The thesis includs the China’s financial market problem, the system problem. The thesis use game theory, information economy theory to solve the delimma4.The thesis treats commercial banks independently, actively to do the small business finance. The thesis use the financial intermediation theory, the relationship between financial medium and debtors theory to help the problem solving.The thesis learn from foreign country’s financial system support to the SMEs development.advocate a way that the financial intermediation sustainablly develop itself and set up a relationship with SMEs,while considering bank market structure\financial innovation\commercial banks credit management technologies

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