Mon, November 24, 2008
Business > Economy

China to establish 3-billion-yuan fund for troubled SMEs

2008-11-24 07:37:12 GMT2008-11-24 15:37:12 (Beijing Time)  Xinhua English

BEIJING, Nov. 24 (Xinhua) -- The China Association of Small and Medium Enterprises (CASME) has initiated a 3-billion-yuan (439.2 million U.S. dollars) venture investment fund as a step to help the country's SMEs raise capital, the body announced in its website on Monday.

The fund will be established by the end of this year.

Other efforts include the joint issue of an SME corporate bond with the northeastern Liaoning provincial government and the founding of a bank with a planned registered capital of 10 billion yuan, according to CASME.

"Upon its establishment, the bank will provide loans only for the small and medium sized enterprises. Companies may get as much as 5 million yuan each for their investment and development," said CASME head Li Zibin without specifying when the bank would open.

Any industrial company with sales revenue up to 300 million yuan would be eligible for assistance from the fund and the bank, said Li.

Li said difficulty in capital raising as a major threat to the SMEs' survival. Statistics from the National Development and Reform Committee showed 67,000 small and medium sized companies with sales income exceeding 5 million yuan closed down in the first half of 2008 due to the economic slowdown and a tight monetary policy.

Companies were being denied enough money two main reasons: a shrinking loan supply from the banks and rising costs.

China's SMEs contribute 60 percent of the national GDP, while getting less than 25 percent of total bank loans.

"It is obviously out of proportion," said Li.

With demand weakening both at home and abroad amid global financial crisis, however, the country has sought to help its troubled SMEs.

The central bank raised the loan quota of both national and regional commercial banks by 5 and 10 percent respectively in the second half to ease the financial pressures on the private companies.

Premier Wen Jiabao also pledged to attach great importance to the difficulties and challenges the companies faced during an inspection of enterprises in eastern Shanghai and Zhejiang Province from Friday to Sunday.

"More supporting policies should be available to create a sound environment for their development," he said.

Li gave three recommendations for SMEs to help them through the difficult times: ensure capital supply by all means; avoid impulsive expansions and investment regardless of the market situation.

"The fundamental way to survive the severe winter is to enhance capability of innovation and improve company management," he said.

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