Call for more SME financing services

China should establish multi-level financing services for small and medium-sized enterprises (SMEs), an official at the Ministry of Industry and Information Technology (MIIT) said Saturday at a conference in Beijing, in order to ease the difficulty for SMEs in raising funds.

The country needs to encourage the development of small and medium-sized financial institutions, and guide more private capital to help fund these enterprises, Zhu Hongren, general engineer of the MIIT, said Saturday.

Listing on stock exchanges such as the Growth Enterprise Market or ChiNEXT could also serve as a financing channel for SMEs, he suggested.

Given SMEs' lack of a credit rating, guarantee firms can provide services to these SMEs to help them in seeking funding, he noted.

The central government has attached great importance to strengthening financial support for SMEs, which account for about 60 percent of China's GDP and 80 percent of the country's employment.

SMEs have suffered from a drop in new orders and rising labor costs over the last year, as well as difficulty in getting financing from banks following the government's tightening of monetary policy in 2011.

Many SMEs have been forced to borrow from illegal underground banking channels, which charge extremely high interest rates. This has led to bankruptcy at a lot of SMEs.

"The pilot financial reform program in Wenzhou has helped SMEs to extend their financial channels, for instance by issuing bonds and private equities," Zhou Dewen, president of the Wenzhou Council for Promotion of Small and Medium-sized Enterprises, told the Global Times Sunday.

In March this year, the State Council approved a pilot financial reform program that legalized some local private lending practices in Wenzhou, so as to help with SMEs' financing. Since then, three private lending service centers in the city have lent a total of 380 million yuan ($60.95 million) to local SMEs.

Private lending rates on average had fallen to 1.78 percent by early December, from a monthly rate of 2.5 to 5 percent in 2011, with officially registered private lending service centers offering monthly rates of 1.2 percent, China Business News reported Saturday citing a local government official.

The declining monthly rate is not only attributable to the financial reform, but also due to the smaller number of borrowers, partly because so many SMEs have gone bankrupt, Zhou noted.

In the first three quarters of this year, total new loans to micro and small enterprises reached 1.35 trillion yuan, accounting for 35 percent of total new corporate loans, 0.6 percentage points higher than the level of the first eight months, central bank data showed.