China to Establish RMB3 Billion Fund for SMEs

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Nov. 25 – By the end of the year, the China Association of Small and Medium Enterprises (CASME) will establish a RMB3 billion venture investment fund to aid SMEs gather capital.

CASME’s efforts also include the joint issue of an SME corporate bond with the northeastern Liaoning provincial government and starting up a bank with a planned registered capital of RMB10 billion.

“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,” CASME head Li Zibin told China Daily.

Financial assistance will be provided to industrial companies with sales revenue of up to RMB300 million. Li said capital raising is major challenge for SMEs.

Li advised SMEs to: 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.

According to statistics from the National Development and Reform Committee, 67,000 SMEs with sales income worth more than RMB5 million shutdown in the first half of 2008 due to the global economic slowdown and monetary policy.Companies found it difficult to obtain funding due to a decreasing loan supply from the banks and rising costs.

China Daily reports that SMEs earnings contribute to 60 percent of the national GDP but are qualified for less than 25 percent of total bank loans.

To remedy this, China’s central bank has raised the loan quota for national and regional commercial banks by 5 and 10 percent in the second half of the year to unburden financial pressures on private companies.