SME financing costs about 15 pct

The real-term loan rate for small and medium-sized enterprises are about 15 percent at the moment, said Li Zibin, president of the China Association of Small and Medium Enterprises.

According to a calculation by the banking regulator, bank loans cover more than 90 percent of large enterprises, but only less than 20 percent of smaller companies, Li said during the Boao Forum for the Asia SME Conference 2013.

The accumulated profits of large industrial enterprises in the first 11 months rose merely 3 percent, but large commercial banks reported more than 25 percent profits, which is strong evidence that the banking system lacks support to real economy.

There were 12.4 million SMEs in China by the end of 2011. They paid 50 percent of the country's tax income, contributed 60 percent of the GDP and employed 80 percent of the urban workers.

"SMEs play a vital role in the Chinese society and economy, but they also bear the brunt amid slowing economic growth," Li said.

Due to a sluggish global market, in the first three quarters in 2012, foreign trade volume by private enterprises retreated 20.7 percent from the same period previous year.

Taxes, which now account for an average 30 percent of the SME's total costs, also add pressure. The tax burden for SMEs increased 12.3 percent in first eight month this year while profits only picked up 5.7 percent.

Fan Gang, director of the National Economic Research Institute, said financing difficulties cannot be solved via short-term policy adjustments. "It mostly is a result of the rising cost because of conflicts led by fierce market competition."

Fan said Chinese SMEs tend to rush into "sunrise industries", when actually they "should focus more on specialized operation and foster core competitiveness.

"The government-supported industries are most likely to see overcapacity," Fan warned.

"All industries in China, apart from heavy-polluting ones, are promising. There is no reason for not being successful if you can mount to top three in a segment market.