Small And Medium Enterprises: Who Will Be Stumped In The Dilemma Of Capital Chain?

Recently, Lu Liqiang, chairman of Zhejiang steel structure, drowned, and then revealed that the cause of his death was deep in usury.

Victim of macroeconomic regulation and control

Things are not that simple.

I was engaged in the loan management work of township enterprises (the predecessor of SMEs) in 1992~1996, and I knew that every policy change and monetary tightening were the first ones to be hit by township enterprises, especially small and medium-sized enterprises which were mainly owned by township entrepreneurs.

And China's policy is just like turning the pancake, stirring up for a while, and pulling out the fire for a while; after a while, it says that the mechanization of agriculture will soon be too fast; for a while, it will support the township enterprises; later, it will be said that the state-owned enterprises are squeezed by the township enterprises; what is even more fatal is monetary policy.

And the pancake of this kind of policy is very harmful to township enterprises.

Because I was in charge of the loan to the township enterprises at the head office level at that time, the level was high and the ability to fight against it was slightly stronger.

However, since the township enterprises began to sprout in 1991, and in the more than 5 years after the collapse of a large number of township enterprises in 1996, the loans I handled were about 1/3 of bad loans. The proportion of bad debts of township enterprises in various provinces and cities was as high as 60% during the same period.

More importantly, a lot of bank corruption cases were related to the loan of township enterprises. The township enterprises bribed the bank loan managers to obtain loans. Some tens of thousands of bank managers were involved in bribery, and some even were sentenced to death.

When a large number of bad debts are linked to a large number of crimes, such loans are not only the most serious risk areas in the banking sector, but also the most stringent risk areas for the subsequent system design.

Since then, SME loans have been shouting year after year, but they can not solve them every year.

In fact, the reason why township enterprises loans so much bad debts is related to the policy change.

Since 2005, in order to "save" a large number of state-owned enterprises approaching the edge of death, the government has implemented the pformation of macroeconomic policies that tilt to state-owned enterprises. The major commercial banks have begun to supply loans to state-owned enterprises without risk and low interest rates, and all loans to township enterprises have been cut off, except for a few township enterprises that have grown into super large enterprises.

Since the term "township enterprise" has been "disappeared", state-owned and joint-stock commercial banks have established the "hidden rules": loans for SMEs are classified as high-risk loans, not only the conditions for issuing them are more and more strict, but also the risk management "lifelong system" and "even sitting system". A small and medium-sized enterprise loan has become a bad debt. Several responsible persons have been arranged to "lay off and collect", stop paying bonus, and even have to be held accountable after retirement.

Is this rule reasonable? If you ask 100 executives from the banking industry, 99 will tell you that it is reasonable.

Why? Not only is accountability too strict, but too easy to be held accountable, so there is no small and medium-sized enterprise loan without internal and external collusion.

More people will tell me that even if there is no internal and external collusion, the probability of accident is too great.

Statistics tell me: when the macroeconomic environment changes suddenly and fiercely, what enterprise is strong against attack? What enterprise's capital chain is most likely to break? There is no doubt that state-owned enterprises have broad financing channels, high management level and strong government support. Unless a large area of systemic risk occurs, most of them will not die.

The small and medium-sized enterprises are the opposite. Most of them belong to the "tide maker". The growth is indeed low, but there is a large number of them. Not only the normal death happens frequently, but once the macro-control happens, the possibility of getting into the capital chain breaking due to the normal pressure of stock pressure is much greater than that of the state-owned enterprises.

As SMEs are most likely to become victims of macroeconomic regulation and control, China's macroeconomic regulation and control often occur. Not to mention the large number of SMEs, the probability of lending errors far exceeds that of state-owned enterprises. Who is willing to touch this "high voltage line", who is willing to take this risk?

New situation in 2011

In the first half of 2010, macroeconomic regulation and control began to spread rapidly from the real estate market to the whole real economy. By May 2011, the economic growth rate continued to decline, and the cost burden of enterprises was bigger and bigger.

I recently visited Zhejiang, Jiangsu, Shandong and other places, and talked with many entrepreneurs and local leaders. I felt deeply that most enterprises in the most developed areas of SMEs such as Zhejiang and Jiangsu, let alone the small and medium-sized enterprises in less developed areas, are now in the "winter". The so-called "mass death" reports may attract eyeballs, but the "closing down" is everywhere. Even the companies that still insist on production will reduce the production scale to the limit, and many enterprises will survive by usury.

They are waiting, and are betting that the macroeconomic environment will improve in the second half of the year.

Obviously, if the macroeconomic regulation and control efforts do not make a fine adjustment, pointing to no change, and no special policies to support SMEs, many SMEs will not survive the four quarter.

Now many media and official investigation agencies admit that the central bank's monetary policy has also increased the pressure of enterprise funds while effectively recovering liquidity. The difficulty of obtaining loans from small and medium enterprises is increasing. In June 2nd, the Ministry of industry and information technology released the "spring report on China's industrial economic operation" in 2011.

In fact, for the vast majority of small and medium-sized enterprises, even when monetary policy is loose, they are also very hard to get loans.

In the past, a large number of small and medium-sized enterprises without commercial banks were able to survive and sprung up.

When the economy develops rapidly, many small and medium-sized enterprises are easy to eat the "leftovers" of large state-owned enterprises. They can obtain advance payments by large enterprises or foreign orders, and can also handle bills discounting. More often, they rely on private lending and financing -- through a very low market operating cost, to digest higher capital costs.

But when the environment is tight, everything changes.

The bank's counterparts told me that under the strict macro-control background, large state-owned enterprises can survive by monopoly, and real estate enterprises can survive by deposits, inventories and usury. Only small and medium-sized enterprises fall first, because most of them belong to the lowest end of the industrial chain. They usually live on "leftovers". Now, large enterprises are tight capital, and real estate enterprises are at a critical moment of self-protection. All the means of production are rising, and "leftovers" are becoming less and less. Even if there is a little bit, it will cost more than the price of "dinner", so that small and medium-sized enterprises can survive.

Bank's attitude towards small and medium enterprises

I repeatedly asked local officials in the survey: is the absolute number of small and medium enterprises at present more? Is there a problem of advanced development and too long front line? Is there any personal quality problem in the SME's capital chain? Almost all local government officials have told me that there are many problems in SMEs, but strategically, local development must be strongly supported by SMEs, because this involves people's livelihood and involves employment and stability.

For the place, more than 80% of the employment comes from small and medium-sized enterprises, and 70% of the tax revenue comes from small and medium-sized enterprises. When the small and medium-sized enterprises are developing vigorously, the place presents the scene of living and working happily, and the government has the money to solve the livelihood problems more.

On the contrary, when 30% of the small and medium-sized enterprises began to lay off workers, our local officials were very nervous. They were worried about the trouble of the unemployed and the tax revenue.

At the same time, I also asked bank officials: whether they would like to grant more loans to SMEs in practical operation? There are differences between North and South and regional differences.

Jiangsu and Zhejiang, which are well developed in small and medium-sized enterprises, include some developed areas in Shandong. Financial institutions generally attach importance to small and medium enterprises loans, and support the development of SMEs by innovating credit products and innovating financing institutions.

But when the overall funding environment is tight, banks are "no money" (quota and position), and good innovative products can only be idle.

When I went back to the north of the Yangtze River, especially in the Yellow River, I asked the bank cadres that they could not give loans to small and medium enterprises, and the rate of bad debts was too high.

Indeed, I asked a number of municipal organizations of commercial banks. Basically, no SME loan has been issued this year.

As far as I know, this year, all major banks have adjusted their loans to invest, real estate development can not be loans, and local financing platforms can not be loans.

That's right.

But many banks will reduce the loans to the real economy by about 30%, which is open to question.

It is understood that, in order to prevent systemic risks, many commercial banks are implementing the "economic capital" management system, requiring that the loan structure be adjusted according to the risk level and comprehensive return level, so that Basel III will be landed urgently, as if Basel III is the best.

This system is designed to enable the grassroots banks to adopt more polarized loans, namely, paying more attention to the two loans of large state-owned enterprises and individuals, and throwing away small and medium-sized enterprises.

The reason is obvious: large state-owned enterprises are enterprises that are guaranteed by the state. They will not collapse, nor fail, but have the greatest security guarantee.

Personal loans are also safe, because many residents now have property and have good conditions for hypothecation. At the same time, such loans can be "arbitrarily" floating interest rates (add a lot of charges to form the so-called middle income), which is both insurance and money making.

The loans of commercial banks are "polarized", and SMEs are naturally squeezed into gaps.

Fortunately, many personal loan products of commercial banks are closely related to small and medium-sized enterprises, because the owners of small and medium-sized enterprises are actually individuals.

Since the beginning of this year, the proportion of individual loans of commercial banks has increased significantly, and many small and medium entrepreneurs are not excluded from applying for such loans in the name of individuals.

Objectively speaking, if this year's commercial banks are not "open up", the small and medium-sized enterprises will not be able to endure more.

But there is one point to be stressed: even large state-owned commercial banks are issuing quasi "usury" in disguise, and the "black market" financing is more open and more rampant.

According to the state institutions, the average lending rate of SMEs issued by the bank is about 15% this year, far higher than the one-year lending benchmark rate, many of which are above 20%.

The black market interest rate has risen to 50% or even higher.

In my survey, I found that some small private Guarantee Corporation, which are active in the commercial banks and the black market, are short term loan institutions for private and small and medium enterprises. They can only earn hundreds of millions of profits this year through only "bridging loan" and usury financing guarantee business.

Seeing them making money in a crazy way, you can imagine how difficult it is for small and medium-sized enterprises! {page_break}

The interest rate of commercial banks is not marketization.

Since small and medium-sized enterprises are in the interest of usury, they can also bear high interest rates objectively. Why do commercial banks that are "fond of poverty and love for wealth" do not lend more interest rates to SMEs? Simply answer: the pricing mechanism of commercial banks' loan risks has not been formed, and there is no institutional basis for the marketization of interest rates.

But further thinking: what will happen if all commercial banks' loan risks are priced out of the city? Many state-owned enterprises, including large state-owned enterprises, may not get loans.

The root cause of the low interest rate environment in China's banking sector is to adapt to the inefficient operation of many large state-owned enterprises, covering a large number of hidden losses caused by advanced investment and ineffective GDP.

According to statistics, at present, China's large state-owned enterprises account for 0.5% of the total business, with more than 50% of the loan share. Local financing platform loans account for 10%, 20% of these loans are inefficient, and 20% are advanced, and no output is formed in the short term.

According to this estimate, the current interest rate level is not low but high, and it will increase the size of the bad debts.

At the same time, raising the loan interest rate on a large scale will not only help to resist inflation, but also greatly raise the financing cost of all enterprises. This sudden increase of capital cost will eventually pass on to the commodity market and continue to push up prices.

Such prospects are unexpected for those economists who advocate the marketization of interest rates as soon as possible.

We must admit that the responsibilities of state-owned enterprises and private enterprises are different. They are the two systems of the national economy.

If we want to strengthen our country, there will be no excellent super large state-owned enterprises. If we want to guard against major systemic risks, there must be strong state-owned enterprises to guarantee the supply of basic products in the market.

However, if we want to be rich, if we want to innovate, if we want to increase employment, if we want to get high growth, we must vigorously develop small and medium-sized enterprises and private enterprises.

How to solve the problem of blood pfusion to two systems at the same time? We must emphasize the division of labor in the financial system, and gradually push forward the reform of interest rate marketization on the basis of financial division of labor.

At the moment, it is necessary to introduce a special policy to solve the problem of small and medium enterprises' loans.

Are there more or less financial institutions in China? There is no doubt that, but why is it more difficult for small and medium-sized enterprises to borrow? No doubt, many small and medium-sized banks, especially local commercial banks, were declared in the guise of supporting the development of local economy and supporting the development of small and medium-sized enterprises at the beginning of their establishment.

Once they have been established, they will seize the big and medium-sized cities immediately, compete with state-owned banks for the company's business and compete for the loan share of state-owned enterprises.

Obviously, the workload of issuing a large state-owned enterprise loan is almost the same as that of issuing a small and medium-sized enterprise loan, but the cost of work is reduced by more than 90%, and the risk is still small.

What is the result? It is the confusion of the division of labor in the market economy, which further compresses the financial resources of small and medium-sized enterprises, and has many disadvantages.

I have always stressed that small and medium-sized banks, especially local banks, are the key support objects for SMEs. Their development must be compatible with the development of small and medium-sized enterprises.

At the same time, small and medium-sized banks should also become the pioneers of market-oriented interest rate reform, and gain competitive advantage through risk pricing advantages.

In line with this, the CBRC should explicitly release the risk pricing power of small and medium banks, and should also restrict their business activities.

Although this is likely to push prices up, sugar cane is not sweet at both ends. Moreover, when SMEs get better financial services, innovative capabilities and output expansion, they will also play a role in stabilizing prices.

We should dialectically look at this.

More importantly, the reform of interest rate liberalization in China's banking industry is an inevitable trend. When the loans for small and medium enterprises are mostly realized by market interest rates, the interest rate marketization reform of state-owned enterprises will also start. This is a gradual process.

The key is to deepen the market-oriented reform of the financial system.

It is difficult to solve the problem of small and medium enterprises loans, which is very difficult.

But if we raise it to a national strategic level, there will be many ways to solve it.

In my research, I found that the living environment of small and medium-sized enterprises varies widely, which is related to the quality of small and medium-sized enterprises, but it is more related to the policy attitude of the local government.

How to support the government? There are many good examples in Jiangsu and Zhejiang provinces, but not enough. Local governments hope that the state will make policies, especially emergency policies.

What policy? The state can test the "dual track system" in the housing system. Why can't we test the dual track system in the credit limit management system? Many local government officials and grass-roots bankers have proposed that I call for a different proportion of the bank's credit line in this year's Bank credit line as a special credit fund for small and medium-sized enterprises.

At the same time, this method will continue - not just to solve urgent problems.

Now many banks have set up a big customer department - chasing state-owned enterprises to lend money. Why can't we set up the SME credit management department to study which SMEs have potential for development? It is worthy of key support and long-term support. More institutions should study special credit products specifically for SMEs, guarantee mortgage system and so on, so that those good companies that do not or lack collateral can also get loans.

It must be emphasized that commercial banks have operational risks, while the market risks of small and medium-sized enterprises are higher than those of state-owned enterprises. However, the advantages and disadvantages of enterprises and the level of risks have a good system and can be accurately identified through the operation of experienced credit experts.

At the same time, financial innovation can also greatly reduce bank risks, such as factory mortgage, inventory mortgage, order mortgage, receivable pledge, including "pfer lease" and "agency leasing", which are widely implemented in Shandong, Jiangsu and Zhejiang provinces. They can directly or indirectly solve the biggest problem of small and medium enterprises' mortgage shortage.

This is not enough. Some bank credit cadres in some places also told me that in order to solve the problem of SMEs' lack of collateral at last, we must include the credibility of people and the reputation of enterprises into the category of "pledge", and implement the unlimited joint and several liability system of corporate joint insurance.

The specific way is: several enterprises sign the UNPROFOR agreement, and incorporate the entrepreneur's personal property into the joint insurance system.

This guarantee is simple and convenient. It seems to be a credit loan in name. It is more effective than any secured mortgage, because it not only mortgages the reputation of enterprises and entrepreneurs, but also mortgages their family property.

This method can be tested in the developed areas of small and medium-sized enterprises.

In short, the biggest experience I have seen in the survey is that there is no lack of enthusiasm for supporting the development of small and medium-sized enterprises and the power of innovation.

The innovation of details is important, but the grassroots and commercial banks themselves can not solve the problem of grasping the direction of the fundamental system.

If the country relies on monopoly and power size distribution and enjoys social resources in the future, small and medium-sized enterprises will still rely on "leftovers" to survive and which bank will not lend to SMEs.

The key to solve the problem of small and medium enterprises loans is to straighten out the relationship between the state and the rich.

On the contrary, if we really allocate the social resources according to the market mode and carry out market competition in more fields, SMEs will surely get considerable development.

The key to solve the problem is actually: whether we should continue to move along the socialist market economic system or hesitate to return to the planned economic system? I believe that the economic system will operate more in accordance with the market economy mode, and the market reform of the financial system will be accelerated.