Comparative study on making loans to large companies and SME's in China

[摘要] The SME financing problem in China has been widely acknowledged during the recent financial crisis. The SMEs compose 99% of all registered enterprises and employ more than 60% of labors in China. They contributed significantly to the economic vitality, as well as to ensuring stable employment and sustainable development of China. However, the SMEs have been short of external funding because they are considered to be riskier than large companies which maintained closer relationships to the governments and state-own-commercial-banks, which are the main financial source under the current banking system in China. Are the SMEs riskier than the large companies in terms of loan issuance? The thesis explores the issue by discussing the current banking structure in China and explaining the reasons from political, economic, social and technological perspectives. Comparing the financial indicators including ROE (return on equity), ROA (return on assets), NPM (net profit margin), ICR (interest coverage ratio), CR (current ratio) and revenue growth of selected SMEs and large companies before and after they received the commercial loans, I find that SMEs did not necessarily demonstrate worse performance than the large companies. Contrarily, the SMEs could more effectively utilize their loans to realize better business outcomes than the large companies did. To further improve the financing issue of SMEs, the thesis will raise recommendations from the perspectives of the government regulatory bodies and the local commercial banks.

[发布机构] Massachusetts Institute of Technology