Think Tank | Supporting Small and Medium sized Enterprises to Achieve a Dual Approach of Market Financing and Public Welfare Financing for Small and Medium sized Enterprises | Public Welfare | Enterprises

The report of the 20th National Congress of the Communist Party of China clearly proposes to support the development of small and medium-sized enterprises. In order to deeply implement the spirit of the 20th National Congress of the Communist Party of China and implement the work deployment of the State Council to assist small and medium-sized enterprises in alleviating difficulties and achieving high-quality development, Shanghai has issued the "Several Measures for Shanghai to Assist Small and Medium sized Enterprises in Stable Growth, Structural Adjustment and Strong Capacity", focusing on the six most important aspects of small and medium-sized enterprises and proposing 28 specific measures.

In recent years, Shanghai has focused on solving the financing difficulties and difficulties of small and medium-sized enterprises, and has successively carried out financing inclusive projects such as building a trinity inclusive financial regulatory system, expanding the scale of financing guarantees, strengthening credit information sharing applications, implementing interest subsidy policies for small and medium-sized enterprise loans, expanding the scope of supply chain financial services, promoting the listing of high-quality small and medium-sized enterprises, and increasing equity fund investment. While innovating financial service methods, it has significantly improved the sense of financing acquisition and satisfaction of small and medium-sized enterprises. However, the task of building a financing service system for small and medium-sized enterprises in Shanghai is still arduous. According to a survey conducted in 2023, 57% of small and medium-sized enterprises still face financial difficulties due to an increase in overdue accounts receivable. Increasing the proportion of long-term loans and credit loans, further reducing financing costs, is undoubtedly an important measure to guide and support the high-quality development of small and medium-sized enterprises in the next step. Moreover, consideration should be given to both market-oriented financing and public welfare financing for small and medium-sized enterprises.

Market financing continues to strengthen

At present, the market financing and government financing channels for small and medium-sized enterprises in Shanghai are relatively sound and convenient. In order to guide financial institutions to serve the real economy and small and medium-sized enterprises, in accordance with the relevant provisions of the newly revised Small and Medium sized Enterprise Promotion Law that require financial institutions to play their role in serving the real economy, large state-owned commercial banks in Shanghai have generally established inclusive financial institutions, while regional small and medium-sized banks actively provide fair and efficient financial services to small and micro enterprises. The city's small and micro enterprise financing credit service platform alone has settled in 43 financial institutions and granted credit of 120 billion yuan. It is expected that by the end of 2023, the balance of inclusive loans will reach 1.1 trillion yuan, and the cumulative investment of seamless renewal loans will exceed 1.2 trillion yuan, greatly strengthening the financing services for small and medium-sized enterprises. At the same time, as of now, the scale of policy guarantee funds for small and medium-sized enterprises in Shanghai has expanded from 5 billion yuan to 10 billion yuan, with the highest proportion of non-performing loan compensation increased to 55%, and the cost of interest subsidies for guarantee loans reduced by nearly 16%. On the basis of reasonably increasing the tolerance for non-performing loans, financial institutions are continuously guided to increase the financing scale and proportion of small and medium-sized enterprises. In addition, according to the actual situation, Shanghai has allocated 70 million yuan of special funds for the development of small and medium-sized enterprises in the municipal financial budget, established four small and medium-sized enterprise development funds with a total investment and subscription scale of 6.733 billion yuan, and promoted the landing of the national small and medium-sized enterprise development fund with a total scale of 35.75 billion yuan in Shanghai. By adhering to policy orientation and market-oriented operation principles, the funds are mainly used to support the construction of public service systems and financing service systems for small and medium-sized enterprises through funding, purchasing services, rewards, and other means, effectively guiding and driving social funds to support the entrepreneurship and innovation of small and medium-sized enterprises.

More emphasis on public welfare financing

It is unavoidable that the development of small and medium-sized enterprises has social benefits, and public welfare financing arrangements should be given attention.

The social benefits of the development of small and medium-sized enterprises are mainly reflected in the following aspects: first, creating employment opportunities. Small and medium-sized enterprises are the form of enterprises that create the most employment opportunities in economic life, especially in emerging industries. Due to their strong innovation ability, small and medium-sized enterprises can quickly promote business development and create a large number of employment opportunities; The second is to increase economic diversity. Small and medium-sized enterprises are the foundation of a market economy, which can increase economic diversity, expand markets in various business fields, and are very important for the economic development of any country; The third is to achieve social equity. Due to the fact that the government often provides subsidies and priority policies to small and medium-sized enterprises, it is more conducive to the entrepreneurship and development of the lower class and vulnerable groups in society. The fourth is to promote technological development. Due to its small scale and relatively low start-up costs, it has the flexibility of trial and error, and can quickly enter and gain competitive advantages in emerging technology fields. Small and medium-sized enterprises are an important force in creating new technologies and business models.

Therefore, it is necessary to distinguish between market-oriented financing and public welfare financing arrangements for small and medium-sized enterprises based on their financing needs and purposes. If small and medium-sized enterprises engage in commercial activities, expand production and operation, or provide returns to stock investors, they need to obtain market financing support through bank loans, bond issuance, stock issuance, or other financial derivatives; If small and medium-sized enterprises carry out production and service activities for social public welfare or to obtain social benefits, they need to have public welfare financing, and seek suitable financing sources such as government funding, charitable funds, or social donations in a targeted manner. In the financing process, risks should be minimized as much as possible while balancing economic and social benefits.

Establish a public welfare support fund for small and medium-sized enterprises

To establish a sound public welfare financing ecosystem as an important "heartwarming" measure that reflects the government's emphasis on and equal treatment of private enterprises under the current situation. It is recommended to pilot the establishment of small and medium-sized enterprise public welfare funds with corresponding reductions in investment value-added and income tax. On the basis of establishing deep cooperative relationships with the government, society, and various public welfare organizations, explore and integrate diversified sources of public welfare funds, improve mechanisms for public welfare fund management, project screening and evaluation, and effect information disclosure, improve the efficiency and social credibility of public welfare fund utilization, and achieve orderly, efficient, standardized, and sustainable public welfare financing arrangements for small and medium-sized enterprises.

At the same time, establishing a sound public welfare financing ecosystem can also encourage small and medium-sized enterprises to strengthen their social responsibility construction, combine social responsibility with enterprise development, ensure that funds are used for projects that can achieve social benefits and sustainable development of enterprises, focus on the efficiency of public welfare fund operation and capital appreciation, and fully leverage the role of funds to maximize the social benefits of public welfare funds.