Sources of Finance
International Conference on the Modern Development of Humanities and Social Science (MDHSS 2013)
Constraints of External Sources of Financing for
Domestic Private Enterprises in China
Fang Yang
Higher Vocational Education School
Ningbo Institute of Education
Ningbo, China
Yangfang1981@gmail.com
Abstract—Private enterprises have been playing an increasingly important role in the development of Chinese economy, but they are having difficulties in accessing external sources of financing which mainly include bank loans, stock market and informal finance. This paper has analyzed the reasons why they face such constrains and also given suggestions to Chinese private enterprises so as to improve their access to external sources of financing. It is believed that it can be helpful to domestic private enterprises in China.
II.
External sources of financing for Chinese private enterprises mainly include bank loans, stock market and informal finance. Banks, especially state-owned banks, are the biggest financial institutions in China, so bank loan should be the most important external source of financing for Chinese private enterprises. However, Chinese private enterprises accounted for only 0.09% of state-owned banks’ lending and
0.23% of all banks’ lending in 1990 in China; although the percentages increased to 0.59% and 0.77%, respectively, in
2001, they were still extremely low (Bai et al. 2006, p.613).
This indicates that access to bank loans is a universal problem for domestic private enterprises in China. With regard to stock market, entering stock market can help private enterprises to raise capital through the listing of shares. Thus, it is also a desirable external source of financing for Chinese private enterprises. There are two major stock exchanges in mainland
China, which are Shanghai Stock Exchange and Shenzhen
Stock Exchange. According to Gregory and Tenev (2001, p.17),
Chinese private enterprises only account for 1%
Constraints of External Sources of Financing for
Domestic Private Enterprises in China
Fang Yang
Higher Vocational Education School
Ningbo Institute of Education
Ningbo, China
Yangfang1981@gmail.com
Abstract—Private enterprises have been playing an increasingly important role in the development of Chinese economy, but they are having difficulties in accessing external sources of financing which mainly include bank loans, stock market and informal finance. This paper has analyzed the reasons why they face such constrains and also given suggestions to Chinese private enterprises so as to improve their access to external sources of financing. It is believed that it can be helpful to domestic private enterprises in China.
II.
External sources of financing for Chinese private enterprises mainly include bank loans, stock market and informal finance. Banks, especially state-owned banks, are the biggest financial institutions in China, so bank loan should be the most important external source of financing for Chinese private enterprises. However, Chinese private enterprises accounted for only 0.09% of state-owned banks’ lending and
0.23% of all banks’ lending in 1990 in China; although the percentages increased to 0.59% and 0.77%, respectively, in
2001, they were still extremely low (Bai et al. 2006, p.613).
This indicates that access to bank loans is a universal problem for domestic private enterprises in China. With regard to stock market, entering stock market can help private enterprises to raise capital through the listing of shares. Thus, it is also a desirable external source of financing for Chinese private enterprises. There are two major stock exchanges in mainland
China, which are Shanghai Stock Exchange and Shenzhen
Stock Exchange. According to Gregory and Tenev (2001, p.17),
Chinese private enterprises only account for 1%
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