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Shanghai backs fundraising for SMEs

SHANGHAI'S financial authority will support small and medium-sized enterprises and diversify fundraising channels while it is still difficult for these enterprises to borrow money from banks.

One of the measures to be taken will expand the coverage of small-sum loan companies. The government will subsidize SMEs when they apply to go public and is studying the feasibility of involving insurers in the credit assessment system to help banks reduce risks when lending to SMEs.

"The prosperity of SMEs is vital to Shanghai's economic growth. Providing good financial services to SMEs is an integrated part of Shanghai achieving its goal of becoming a global financial hub," said Fan Yongjin, deputy director of the Shanghai Financial Services Office,today at a conference to address the difficulties SMEs face to get funding.

To diversify the funding channels, Shanghai launched the first small-sum loan company in November last year. The government has so far approved the establishment of 30 small-sum loan companies, which cover most of the districts in the city. By the end of last month, they had lent more than 1.5 billion yuan (US$219.8 million) to local SMEs.

Small-sum loan companies have more flexibility in setting interest rates and usually lend no more than 500,000 yuan at a time. This caters to the demand of SMEs, which are companies with less than 300 million yuan (US$43.9 million) in annual sales.

"We will further expand the network of small-sum loan companies to support the development of SMEs," said Fan.

He noted the government was encouraging SMEs to seek direct capital by getting listed on the upcoming growth board and SMEs could obtain subsidies when they apply to go public. He did not reveal the exact amount that companies could receive.

To boost the vitality of SMEs, China's banking regulator has asked all the national banks to set up special subsidiaries to serve the sector. But higher risks made lenders more willing to offer credit to bigger companies with more solid assets.

The Shanghai government is considering the integration of insurers into the system -- to make them guarantors and to use their experience in risk management to reduce the pressure on banks for lending to SMEs.


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