Financing Small and Medium Enterprises in China: Recent Trends and Prospects beyond Shadow Banking

HKUST IEMS Working Papers No. 2015-24

SHARE THIS

Kellee S. Tsai

Small and medium enterprises (SMEs) represent the backbone of China’s economy, yet they lack access to bank credit. SMEs thus rely on a wide range of alternative sources, including informal finance, online peer-to-peer (P2P) platforms, registered non-banking financial institutions (NBFIs), and underground financiers. This paper distinguishes among different types of ‘shadow banking’ to clarify popular misconceptions about the nature of risks associated with informal financial intermediation in China. The evolution of SME finance in other contexts suggests that regulated and well-managed NBFCs provide an enduring foundation for commercialised financial intermediation even in advanced industrialised economies.

Email Subscription

Get updates from HKUST IEMS

SUBSCRIBE