A Credit Policy Study of Chinese Banks on Small and Medium-sized Enterprises

ZHENG XIAOSONG: A credit policy study of Chinese banks on small and medium-sized enterprises. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2013, LXI, No. 7, pp. 2973–2982 In recent years, there is rising attention on the diffi cult fi nancing problems of small and mediumsized enterprises (SMEs). With constant development and improvement in China’s socialist market economy system, SMEs is becoming a pivotal part of China’s national economy. It can be said that the development of SMEs makes a great contribution to China’s national economy development. However, SMEs are facing fi nancing bottlenecks at the same time. This is not only because of the limited fi nancing capabilities of SMEs themselves but also because of the various commercial bank credit policies. It is necessary to solve credit policy problems between SMEs and banks, not only for SMEs but also for the further development of commercial banks. This paper analyses the problems and the reasons of “credit grudging” behavior of China’s commercial banks and SMEs fi nancing diffi culties through a critical analysis. This paper also uses the method of the dynamic game theory to probe into credit problems between SMEs and commercial banks under the condition of information asymmetry. At the end of the paper, conclusions are made and suggestions are proposed for a win-win solution concerning credit policy problems between SMEs and commercial banks. commercial banks, SMEs, China, credit policy, game theory Financing diffi culty among SMEs does not only exist in China, but also prevails worldwide. SMEs has been the major force of the national economy in recent years (Li, 2011; Hu and Zhou, 2011; Bai et al., 2012), however, due to the adverse conditions of SMEs such as small scale, few assets, low credit degree and discriminatory treatments from government and the market, the diffi culty of fi nancing is gradually becoming the bottleneck for Chinese SMEs under the situation of banks’ ‘credit grudging’ (Liu, 2007). This increasingly obvious problem is now the concern of the country, and several laws and regulations or specifi c policies have been carried out by government to support SMEs (ACFIC, 2012). Taking loans from fi nancial institutions is the major fi nancial channel for Chinese SMEs (Meyer, 1998). As the major force of the SME credit market, Commercial bank is the key component of Chinese fi nancial institutions (Xu, 2008). Nevertheless, commercial banks do not put much emphasis on SME fi nancing service problems according to previous research (Beck, 2006). Under the situation of close integration of Chinese and global economy, new challenges and opportunities would put Chinese SMEs in a strong position. By drawing on the experiences of foreign banking to eliminate credit risk, SMEs would certainly become another profi t growth point for domestic commercial banks (Wu and Wang, 2012). In order to fi nd a feasible solution for solving fi nancing problem for SMEs, this paper aims to study domestic credit policies and strategies towards SMEs, in the context of current trend of banks’ development and China’s economy. The study on credit policy is helpful for achieving a win-win situation between commercial banks and SMEs. SMEs can broaden their capital source to maintain a sustainable development while banks can promote innovation in the fi eld of fi nancing system (Zhu, 2004). In the literature an increasing number of researches have been carried out for studying the problem of commercial banks’ sustainable development. Researchers conduct theoretical