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The Legal Analysis of the Financing Problem of Small and Medium-sized Enterprises in China

Author: ZhangLei
Tutor: FuZuo
School: Jilin University
Course: Legal
Keywords: Small and Medium-sized Enterprises (SMEs) Financing Method Legal Mechanisms
CLC: D922.29
Type: Master's thesis
Year: 2010
Downloads: 600
Quote: 2
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Abstract

30 years since reform and opening up, China’s small and medium enterprises (SMEs) has grown, has become the promotion of social productive forces and promote the building of a harmonious socialist society as an important force. However, shortage of funds, difficulties in financing has always troubled SMEs, especially now in the global financial crisis, the SMEs face more difficult financial situation. Although the Chinese government increased attention to SMEs, also unveiled a number of policy measures to support the development of SMEs, however, financing difficulties of SMEs have not been resolved from a legal perspective, the contradiction between the financial environment optimization and financing legal system lagging behind still exist. Therefore, in order to solve the financing problem of SMEs, the financing of the legal environment for SMEs to conduct a comprehensive and systematic analysis and discussion has great academic and application value.In this article, literature research, qualitative research and economic research methods have been used to study SMEs financing legal issues. This paper to be divided into three parts: introduction, main part and conclusion.Introduction is mainly raises the question, explain the topics of meaning and purpose. Research legal issues of SMEs financing is necessary and meaningful.The main part of the paper is divided into four chapters.The first chapter explains the theoretical issues related to SMEs financing, in order to do necessary theoretical preparation for constructing the legal system of financing of SMEs. In the first part, we first analyzed the necessity for establishing a unified legal definition of SMEs, introduced two common international legal definitions of SMEs, namely quantitative analysis and qualitative analysis. Next, we introduced legal definitions of SMEs in different countries and regions, from the perspective of foreign and domestic. We introduced the legal definitions of SMEs of the United States, Japan and the European Union. In these countries and regions, SMEs developed well. We introduced the history of China’s legal definition of SMEs, and then we discussed how to revise China’s current criteria for defining SMEs. The second part describes the legal form for SMEs, and introduces their concepts, characteristics, advantages and disadvantages. The third part describes the role of SMEs in the national economy. SMEs alleviate employment pressure, and promote technological innovation, promoting economic restructuring, expanding exports and so have made a great contribution. The forth part explains the importance of financing to SMEs. Financing for SMEs survival and development is important. To enable the SMEs to always maintain the vigor and vitality and a strong momentum, we must solve the financing problem of SMEs.The second chapter describes the financing situation of China’s SMEs. The first part introduces the main forms of financing for SMEs and their characteristics. According to the direction of the different funding sources, financing can be divided into internal financing and external financing. According to whether by means of banks and other financial institutions, external financing can be divided into direct financing and indirect financing. In the second part, the financing difficulties of SMEs in China were described. Financing of SMEs is a global problem, in our country is no exception, especially in the current global financial crisis is exacerbated by small and medium enterprises financing. Specifically as follows: lack of internal financing; narrow channels of direct financing; bank financing support for SMEs is limited, indirect financing is difficult; informal private financing as an important channel for SMEs financing; in different regions, SMEs financing problem is significantly different.The third chapter analyzes the causes of the plight of SMEs financing in China from a legal perspective. In the first part of this chapter we analyzed SMEs’own reasons. First, China’s SMEs lack of clarity of property rights, there are shortcomings in the enterprise system. Second, the SMEs business is uncertain, lack of competitiveness and risk-resisting ability. Third, poor awareness of SMEs credit, credit is obviously insufficient, which is caused by one of the reasons of their financing difficulties. Fourth, the special needs of SMEs to financing led to its financing difficulties. Fifth, SMEs can not provide appropriate and effective assurance, banks are reluctant to lend to them, exacerbating the plight of SMEs financing. The second part we analyzed the external legal environment restrictions on financing of SMEs.The forth chapter discusses how to improve the legal mechanisms of SMEs in China. In the first part, we analyzed how to improve the legal mechanisms of SMEs’internal financing. First of all, clear property rights, improve the enterprise system. Second, modify the depreciation policy of fixed assets. Finally, revise the relevant provisions of tax law to reduce the tax burden for SMEs. In the second part, we discussed how to improve the legal mechanisms of SMEs’direct financing, from private financing and venture (risk) investment point of view. To improve private financing legal mechanisms, first, develop a "Private Financing Law" confirm private financing in law. Second, we should strictly distinguish between private financing and "illegal deposits from the public" behavior. Finally, allow the diversification of forms of private financing. We can improve the legal mechanisms of the venture (risk) investment from the following aspects: first of all to accelerate the development of "Venture Capital Law"; Second, we must modify the provisions of "Company Law" which are not suitable; third, improve the protection of intellectual property legal system; Finally, tax laws should be amended to reduce the risk of corporate tax burden. In the third part, we discussed how to improve the legal mechanisms of SMEs’indirect financing, specifically including the law of the Credit Guarantee System and the Finance Lease Law System. To perfect the legal system of Credit Guarantee System, on the one hand to further implement the "Guarantee Law", revise and improvement its shortcomings; other hand, accelerate the improvement of "SMEs Credit Guarantee Act," to better regulate SMEs’credit guarantee activities. The legal system on financial lease should be improved the following aspects: first, to speed up legislation and step up introduction of a "Finance Lease Law"; Second, the development of relevant laws and regulations, reduce the financial leasing market access threshold; finally, improve laws and regulations related to financial leasing.Conclusion is a brief summary of the article. We summarized some basic understanding and views of this paper, and pointed out the shortcomings of the article.

The Legal Analysis of the Financing Problem of Small and Medium-sized Enterprises in China

Abstract

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