Financial Innovation of Private Enterprises in China

Keywords: Financial Innovation, Financing, Private Enterprises

Nowadays, financing problem seems to be the barrier of private enterprises’ development in China. It is serious that without financial innovation, they cannot make profit and develop swiftly, even cannot enduring.

As you dear teacher said in the class, the great majority of private enterprises is in Zhejiang Province. The private enterprise has emerged in ancient time in Zhejiang. They people organize their own company to make money individually. As time pasted, they survived in tough competition and also run to this time. There’s no doubt that private enterprises have been contributing to creating working position and technology innovation.

It is well known that the prime element of a new established enterprise is money. But among thousands of private enterprises in Zhejiang, the business enterprises’ register capital is mainly between 50-5,000,000 dollars, while only 17.1% of all business enterprises are above 5,000,000 dollars, comparably 24.1% of all business enterprises are below 500,000 dollars .Low capital running implies the enterprise cannot sustain for a long time in the future. The related report of Zhejiang Economic and Trade Commission pointed out recently, “The difficulties the enterprises met and the big pressure they beared is the most outstanding part in this economic growth period.”

Not only in Zhejiang, today in China, private SMEs(small and medium enterprises) have been the most active and energetic part of economy and it’s the prime reason for stabilizing and sustaining the development of economy of China obviously. are a market competition of the corpus is the composition that stimulate most in the national economy, is to maintain the important strength of economic stability development, is a creation to work and the technique innovate of important source. The margin is difficult to become the outstanding factor that the baffling Zhejiang run by private capital small and medium enterprises develop at present, many run by private capital small and medium enterprises sink into to stop production or close down of predicament. The economic trade Wei in Zhejiang province related report points out recently, \"is current the production conducts a difficult heavier business enterprise especially the small and medium enterprises have great capacity noodles widely\\"the business enterprise meets currently of difficulty of many and the big pressure is this economic growth period the most outstanding\".

Financial innovation is seemingly the top issue of private enterprises in China nowadays, Only private enterprises, financing institutions, the government and whole society actively participate in, can the issue be resolved gradually among SMEs in China.

Though the run by private capital small and medium enterprises of Zhejiang obtained a substantial development, compared with the stateowned big medium-sized business enterprise, it still exists many disadvantages factor at the margin. Main performance at: On being that the run by private capital small and medium enterprises finance system is

disfunctional, the business enterprise information clarity differs and causes its property letter not high. According to the survey, the run by private capital small and medium enterprises finance of above province 50% in Zhejiang manages norm not, many business enterprises lack enough to audit section approbation through the finance of financial report and good of continuous management record. This makes bank to the management condition of these business enterprise realities etc. background data hard and accurate judgment and confidence, increased the letter loan of bank risk. Two is majority of run by private capital small and medium enterprises the scale is smaller, many business enterprises still keep staying around to labor intensive type and generally industrial article to process realm, technique development ability bad, the industrial upgrading makes slow progress, the management exists very big indetermination and high failure rate. Three is run by private capital small and medium enterprises to lack enough can used for the property that guarantees mortgage. Because bank requests to mortgage a property to usually is house, land or large fixed assets etc., but run by private capital small and medium enterprises because the scale limits usually don't have this kind of ownership of property. These inborn shortage's limiting a private enterprise is particularly the basic condition that the run by private capital small and medium enterprises acquire a loan from the bank.

1. Establishment of SME 2. Government’s Attention 3. Perfect Credit Guarantee System

References

1. China Data Network

2. Financial Innovation ---- Peter Tufano June 16, 2005 3. 民营企业呼唤金融创新 ---- Wang Binbin Sept 22,2008

4. Wikipedia ---- Financial Innovation & Private Enterprises