The problem also lies in the current financial system. Most of China's commercial banks are state-owned and loans they grant account for a major share of the total bank lending. When asked to make a choice between profiting and risk control, state-owned commercial banks will definitely choose the latter simply because of their state-owned nature. SMEs are not blessed with monetary support from those large commercial banks due to their comparatively low credit ratings. Those commercial banks would rather shoehorn money into rich SOEs than feed the fund-thirsty SMEs.

Meanwhile, the current financial system also affects innovation of state-owned banks, which haven't created product or service packages catering to SMEs. Another factor that halts SMEs financing lies in the incomplete credit guarantee system. Because of their low credit standing, SMEs could not gain bank loans without a credit guarantee. The absence of complete regulations and laws concerning credit guarantees has made financing SMEs even more difficult.

In addition, China still has not set up a ministry-level department to promote the development of SMEs, nor has it made any specific financial, taxation, or fiscal policies. For most of the local governments, their support for SMEs was just restrained to paperwork or some guiding principles. For this reason, SMEs don't know whom to turn to for help when trapped in a financing predicament.

From my point of view, the government should play a leading role in constructing a complete administrative and financing system for SMEs. Financial institutions, business associations and enterprises should also play an active role. More detailed suggestions include:

The government should first strengthen its administration, guidance and services for SMEs. The administration of SMEs is connected to law, finance, banking, human resources, skill training, and industrial and commercial administration. China should build up a separate administrative body to promote its regulation, organization, coordination and services for SMEs.

Relevant laws and regulations should be made or improved. The country should enact special laws and regulations, clearly stating how central and local budgets should support SMEs through guarantees, subsidies, tax cuts, insurance and special funds.

We should also continually push for the reform and restructuring of China's financial system. Without related policies on financial subsidies and tax cuts, state-owned commercial banks are not motivated to offer loans for SMEs. I think we should develop small and medium-sized commercial banks to diversify the financial sources for SMEs. We should also set up a guarantee system, develop bond financing, and encourage financing cooperation between SMEs.

In addition, an information-sharing system and a credit-rating standard for SMEs are also needed. We should press for the digitization of SME information management to establish a nationwide or local information-sharing system. At the same time, with the introduction of national incentive policies, a credit-rating standard for SMEs should also be set up to encourage various institutions to provide financing for SMEs.