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Change in perception required

(China Daily)

13:44, October 20, 2011

BEIJING, Oct. 20 (Xinhuanet) -- For some time now, the difficulties facing small and medium-sized enterprises (SMEs), especially small and micro ones, have aroused the attention of the nation's authorities. The State Council has pledged stronger financial and fiscal support to help with the development of cash-strapped small and micro-sized enterprises, clearly increased the tolerance for the non-performing loan ratios of small enterprises and extended the scope and expiration day of the policy reducing half of the business tax to the end of 2015, which is considered a direct favor for SMEs currently suffering economic difficulties.

It is normal for enterprises to encounter challenges in survival and development, but is significant that most SMEs have faced greater difficulties recently than during the financial crisis in 2008. SMEs seem to be struggling with the high inflation caused by the previous over-easing monetary policy, which has resulted in a compression of the loan scale and higher interest rates. This has made financing difficult for SMEs.

At the micro level, SMEs still need to improve their credibility and comprehensive quality. Meanwhile, there are too many opportunities for speculative profits of various kinds in society, which leads to a lack of resources and impetus promoting long-term start-up and innovation.

At the macro level, finance has failed to provide enough support for SMEs, especially as there is a lack of professional small and medium-sized financial institutions compatible with SMEs, such as policy banks offering financing service to SMEs. In addition, SMEs' channels for financing through issuing stocks and bonds are not open enough.

During the global financial crisis in 2009, the State Council issued a series of six policies and measures to support SMEs, but their implementation failed to make any substantial improvements in SMEs' business environment and their heavy tax burden and financing difficulties remained.

The problems then are with SMEs themselves and the system. These problems have not been solved during the past decade and have been further aggravated by the tight fiscal policy.

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