Small and micro-sized foreign trade enterprises (hereinafter referred to as ‘SMFTEs’) are an important force of China’s export, which forms the three drivers of the economy together with investment and consumption. These enterprises have an immediate impact on the country’s steady export growth and healthy socio-economic development.
Currently, SMFTEs are seen enjoying an increasing weight in China’s foreign trade. According to China’s Medium, Small and Micro-sized Enterprises Development Report (212) released by China International Cooperation Association of Small and Medium Enterprises, by the end of 2011, there had been 12.531 million enterprises registered in the Industrial and Commercial Bureaus across China, 99.7% of which were medium, small and micro-sized enterprises; the total number of small and micro export enterprises had been 188,000, accounting for 73% of export enterprises in China. The number had risen to 300,000 by the end of 2016, 30,000 of which were located in Jiangsu.
However, SMFTEs are faced with a tough survival and financing environment for the following reasons: a high threshold of the conventional capital market; an imperfect private lending system with high borrowing costs and risks; insufficient supporting services from financial institutions; and an absence of a credit system for these enterprises, which leads to information asymmetry between them and financial institutions.
Facing up to the situation, the municipal and district governments of Wuxi, Jiangsu Province have taken the lead in a pilot programme in financial innovation to provide credit support with low interest rates. The support model is that Wuxi Dagong Credit Information Service Company provides credit assessments, and the government, bank and re-guarantee institution share financing risks in the proportion of 2:2:6.
Jiangsu Zhuhong Forging Co., LTD., which got RMB 500 million’s worth of credit loan, is a recent example. The model of Dagong cooperating with the government, bank and re-guarantee institution not only builds a financing channel for the local SMFTEs, but also provides a reference for the country's financial innovation.