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

Author

Listed:
  • Kellee Tsai

    (Division of Social Science, Hong Kong University of Science and Technology
    Division of Political Science, Johns Hopkins University
    Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

Abstract

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.

Suggested Citation

  • Kellee Tsai, 2015. "Financing Small and Medium Enterprises in China: Recent Trends and Prospects beyond Shadow Banking," HKUST IEMS Working Paper Series 2015-24, HKUST Institute for Emerging Market Studies, revised May 2015.
    • Handle: RePEc:hku:wpaper:201524
    as

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    File URL: http://iems.ust.hk/assets/publications/working-papers-2015/iemswp2015-24.pdf
    File Function: First version, 2015
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    References listed on IDEAS

    as
    1. Schmidt, Reinhard H. & Hackethal, Andreas & Tyrell, Marcel, 1999. "Disintermediation and the Role of Banks in Europe: An International Comparison," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 36-67, January.
    2. Jeffrey Carmichael & Michael Pomerleano, 2002. "The Development and Regulation of Non-Bank Financial Institutions," World Bank Publications - Books, The World Bank Group, number 15236, December.
    3. Kinghorn, Janice Rye & Nye, John Vincent, 1996. "The Scale of Production in Western Economic Development: A Comparison of Official Industry Statistics in the United States, Britain, France, and Germany, 1905–1913," The Journal of Economic History, Cambridge University Press, vol. 56(1), pages 90-112, March.
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    Cited by:

    1. Tobin, Damian & Volz, Ulrich, 2018. "The Development and Transformation of the People’s Republic of China’s Financial System," ADBI Working Papers 825, Asian Development Bank Institute.
    2. Sandra Obiora & Yong Zeng, 2019. "Factors Affecting the Adoption of Alternative Financing Methods for Startups by Africans in China," Proceedings of International Academic Conferences 9010883, International Institute of Social and Economic Sciences.
    3. Jingzhu Chen & Yuemei Ji, 2022. "Is Finance Good for Growth? New Evidence from China," CESifo Working Paper Series 9882, CESifo.
    4. Löchel, Horst & Packham, Natalie & Hölzl, Eugen, 2016. "The funding of small and medium companies by shadow-banks in China," Frankfurt School - Working Paper Series 220, Frankfurt School of Finance and Management.
    5. Zhang, Hongxu & Amankwah-Amoah, Joseph & Beaverstock, Jonathan, 2019. "Toward a construct of dynamic capabilities malfunction: Insights from failed Chinese entrepreneurs," Journal of Business Research, Elsevier, vol. 98(C), pages 415-429.
    6. Tang, Weiqi & Meng, Bo & Wu, Libo & Liu, Yu, 2016. "Undermined climate policies : a study on the impact of regulatory and financial discrimination across heterogeneous firms in China," IDE Discussion Papers 622, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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    More about this item

    Keywords

    China; shadow banking; informal finance; financial development;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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