Deepening and Strengthening Financial Support Mechanism for Small and Micro Enterprises

Yang Meng, Author

On May 19th, the China Banking Regulatory Commission, the People's Bank of China, and other eight departments jointly issued a notice titled "Some Measures to Support Small and Micro Enterprises in Financing", which proposes 23 specific measures to increase financial supply, reduce comprehensive financing costs, and improve financing efficiency. Among them, "Deepening and Strengthening Financial Support Mechanism for Small and Micro Enterprises" is the first measure.

The mechanism, established by the China Banking Regulatory Commission in collaboration with the National Development and Reform Commission, aims to promote the integration of government guidance and market forces, and resolve the bottlenecks and obstacles that hinder small and micro enterprises' access to bank credit. As of now, the mechanism has facilitated over 67 million visits to entrepreneurs and provided loans totaling 126 trillion yuan, with approximately one-third being credit-based.

In recent years, small and micro enterprises have made significant progress in financing, thanks to the combined efforts of government policies, financial regulations, and market mechanisms. As of the end of the first quarter this year, the outstanding balance of inclusive loans for small and micro enterprises stood at 35.3 trillion yuan, representing a year-on-year growth of 12.5%. However, despite these impressive gains, the actual financing conditions faced by small and micro enterprises have not undergone substantial changes. The main reason is that there still exists a credit gap between their own conditions and the requirements for credit.

The existence of this credit gap indicates that relying solely on market forces to narrow it will encounter bottlenecks, and further efforts are needed to bridge this gap through the establishment of financial support mechanisms. It is precisely this mechanism that aims to empower small and micro enterprises with financing capabilities, enabling them to break through the bottleneck.

It is well known that inefficient idle funds also contribute significantly to the plight faced by small and micro enterprises. The credits obtained by these enterprises from banks are often stuck in non-performing assets (accounts receivable) due to the dominance of large corporations, which can lead to a further decline in their liquidity. In this context, it is crucial to establish an accounting asset financing mechanism that complements the existing accounting payment protection system.

The deepening and strengthening of financial support mechanisms for small and micro enterprises also requires closer coordination with other policy tools. On one hand, we should strengthen collaboration with government-backed guarantees, loan-to- equity financing, and "shareholding" mechanisms to pool various resources and promote the development of small and micro enterprises; on the other hand, we should incorporate mature "government-bank-insurance" credit support modes into practice, improving risk-sharing compensation mechanisms to align commercial banks' risk preferences with small and micro enterprises' financing risks.

This column article represents only the author's personal views.