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China opens more SME finance channels

2009-09-21 18:00 BJT

During the financial crisis and economic slowdown, around 40 percent of small and medium sized enterprises in China have faced bankruptcy. The major difficulty for these SMEs has been a lack of financing.

On Monday a bond insurance company dedicated to helping small firms issue corporate bonds was set up, as part of the country's efforts to open more finance channels for them.

In the first 8 months of this year, only 7 small and medium sized firms out of 470 issued corporate bonds to raise funds. But they raised 230 million yuan, less than a ten-thousandth of the total since the bond market marked their credit level as low.

A representative of SMEs said, "It's extremely difficult for us to issue bonds. We are, first of all, small. And we are short of warrantee and credit. So we usually go to the banks for loans."

That's the situation China's first professional bond insurance company wants to change. The company was set up by the National Association of Financial Market Institutional Investors and six large state firms such as PetroChina. The company aims to raise the credit level of SMEs through warrantee and issuing financial derivatives. In this way, small companies can use the bond market to raise money.

Shi Wenchao, Secretary General of National Asso. of Financial Market Institutional Investors, said, "Credit products carry credit risks. If we transfer these risks to those powerful and capable hands through some system arrangements, the market will be stable and dynamic. "

Apart from the bond market, China is also opening the stock and insurance market to SMEs.

China's first Growth Enterprise Market is going to launch soon, providing smaller high-tech companies to raise funds. The first batch of 13 firms have been approved. Another ten firms will go into assessment from Monday to Wednesday.

In terms of insurance, smaller exporters have become the focus clients of Chinese insurers. In the first eight months, over 460 exporters received 86-million-US-dollar compensation for 600 export cases.

China's top economic policy maker says SMEs in China account for 90 percent of company number and one third of GDP, but less than 20 percent of all bank loans. It vows to encourage more commercial banks, township banks, rural non-bank financial institutions, and even venture capital and private funds to lend to SMEs.

Editor: Zhang Ning | Source: CCTV.com