Capital shortages that have held back the growth of small- and medium-sized enterprises (SMEs) for years might be alleviated by new Chinese policies.

 

People's Bank of China vice President Su Ning said the central bank would encourage some SMEs to issue bonds and try to attract venture capital.

 

Wang Zhaoxing, assistant president of the Banking Regulatory Commission, said that SMEs were potentially a lucrative market for indigenous banks.

 

To succeed in this niche of the market, he said that banks should set up departments targeting them specifically. "SMEs are scattered and usually have a smaller need for credit. The risks involved however are often hard to discern and require specialist expertise."

 

Wang suggested banks offer SMEs incentives to facilitate their growth and manage loans to them separately from other credit operations.

 

SMEs financing woes are the next issue on the agenda for financing authorities now that share reforms affecting more than 1,200 larger firms are drawing to a successful conclusion.

 

Stimulated by a rising Renminbi, the split share reform and the listing of a number of large indigenous companies including the Industrial and Commercial Bank of China, the nation's stock markets have been in rambunctious form this year.

 

Driven up by bank and property shares, the Shanghai Composite Index, which covers both A- and B-shares, rose 38.46 points on Tuesday on the back of total turnover of 43.34 billion yuan.

 

Analysts contend that developing a multi-level capital market that can meet the needs of various companies is now an urgent priority.

 

Only 84 SMEs had gone public on the Shenzhen Stock Exchange by Nov. 24, raising aggregate funds of 23.1 billion yuan. More than 90 percent of China's 420 million SMEs depend on banks to ease capital shortages.

 

China plans to set up an SME growth board before 2010.

 

(Xinhua News Agency December 14, 2006)