H 银行对中小企业融资问题和对策研究

1. INTRODUCTION

1.1 Research Background

Under  the  terms  of  the  WTO  arrangement,  the  financial  market  is  to  be  opened  to foreign  bank,  and  the relaxation  of  entry,  product  and  market  controlling  is  driving much  of  the  changes.  The  banks  do  believe  that overall  market  is  becoming  more clients driven and they have been able to introduce some new products to the market. However,  the  market  share  figure  fails  to  reflect  how  the  foreign  banks  continue  to define the market segment that offer them the opportunity to excel and plot a path of stable  nd  long  term  expansion.  In  2011,  the  foreign banks are  operating  in  an environment  where  liquidity  has  been  progressively  tightened.  At  the  time  of  2011, the People’s Bank of China (PBOC)’s has increased banks’ reserve requirement ratio (RRR) six times since the beginning of the year.

In  addition  to  growing  organically,  foreign  banks  are  pursuing  strategic partnerships and making acquisitions where possible in many different parts of the financial sector. They  continue  to  believe  that  China  offers  rich  opportunities and  also  continue  to believe  that  they  will  only  be  able  to  exploit  these  opportunities,  and  the  regulators across  the  sector  facilitate  the  growing  internationalization  of  the  Chinese  economy. In order to set up solid banking relationship with domestic companies, foreign banks needs  to  issue  some  localization  products,  like  lending for  Small-Medium  Sized Enterprises (SME), Trade Finance, etc.

Small and Medium Sized Enterprise have become significant component of Chinese economy.  At  the  present,  the financing  difficulties  of  SMEs  have  become  a  biggest hurdle  in  sustainable  Development  of  the  bottleneck.  In 2010,  the  National Development  and  Reform  Commission  published  the  "SME  Growth  Project"  report and mentioned  that  SMEs  in  China  now  has  4240  million,  most  of  them  occupied around 58.9% of total sales, and the value of final goods and services occupied 58% of  the  national  GDP,  new  products,  about  82%  of  all  new products  to  address  the urban  employment  accounted  for  a  net  increase  of  employment.  But,  the  traditional industries, like textiles, shoes, have a big impact. 

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1.2 Significance of thethesis

In  the  current  globalization  age,  enterprises  are  encountering  more  and  more challenges both internally and externally. The product localization has become one of the most critical strategies that contribute to the success and sustaining development of an enterprise. 

A reasonable market strategy and valuable financial product not only can provoke the initiative  and  creativity  of  its business  but  also  promote  them  to  realize  its  goals  to maintain its market share. 

H Bank (China) Co. Ltd has been in the market for more than 186 years, and entered into  Chinese  financial  market since  2007.  Under  the  competition  with  other  foreign banks, it should optimize its business strategy and localize its product that is valuable for the domestic corporations. 

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2. Literature Review

Under this part, two theories which may efficiently guide the H bank to improve its financing issues for Small and Medium Enterprise will be shown. After reviewing the theories, the thesis will try to sum up the main ideas of them which can be useful and how to make them into practice. 

2.1 Concept of SME Financing

For  better  understanding  about  the  SME  financing  problem,  a  great  multitude  of specific items and buzzwords are needed to introduce. These items cover the field of financing problem, and assist you to smooth the reading of the thesis. 

2.1.1 Concerns with the SME Financing Issues in Foreign Bank 

With the development of China's Socialist market economy, the rapid growth of SMEs has become a strong driving force of economic development, especially after China's accession to the WTO in 2001 and further intensified competition in the world market, however,  the  financing  problem  in  our  country  has  become  the  bottleneck  which hinders the rapid and healthy development of SME Just mentioned as above, the financing of small and medium-size enterprises (SMEs) has been a subject of great interest both to policy-makers and researchers because of the  significance  of  SMEs  in private  sectors  around  the  world.  According  to  a calculation by the banking regulator, bank loans cover more than 90 percent of large enterprises,  but  only  less  than  20  percent  of  smaller  companies,  so  SME  financing difficulties have been an important issues in the economic development

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2.2 About Foreign Banks in China

The growth of foreign banks in the Chinese market has accelerated over the last three years since China entered the World Trade Organization. According to the CBRC, by end-December,  2012,  foreign  banks  have  established  360 representative  offices,  210 branches  and  14  subsidiaries  or  joint-venture  entities.  13  foreign  banks  are  now permitted to engage in internet banking, and five foreign bank branches are permitted to offer custodian services for securities transactions for foreign institutional investors. Overall,  foreign  banks  can  offer  around  100  products  under 12  broad  categories  of business  activity.  As  of  end-July,  2012,  the  total  assets  of  foreign  banks  reached US$2.15  trillion,  including  US$39.2  billion  in  loans,  representing  1.82%  of  the market share, 20% of foreign exchange lending market.   Their local currency loans reached RMB85.7 billion, an increase of 48% over the last year. Their non-performing asset ratio was 1.5% while their non-performing loan ratio was merely 1.59%. 

M&A activity is increasing and the recent announcements of investments in excess of US$78  billion  in  three  of  the large  state-owned  commercial  banks  by  foreign institutions  and  international  investors  mark  a  new  stage  of bank investment  and highlight the commitment of the Chinese Government to bank reform and the role that foreign banks can play.

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3. Case Description ............... 7

3.1  Introduction to H Bank (China) Corporate ........... 7

3.1.1  H Bank’s in China fails to gain extra traction ................ 8

3.1.2  Equity Investment of H Bank in China ............ 8

3.2  Introduction of SME Financing in China ..................... 8

3.2.1  SME Financing Status ................... 9

4. Case Analysis ....................... 13

4.1 The reasons for the financing difficulty for the SMEs ............ 13

4.1.1 Financial Institutions Reasons ............ 13

4.1.2 The Government Service Department Reasons .............. 13

4.2 The reason of SME Financing Difficulties for Foreign Bank ............... 14

5. Recommendation .................... 39

5.1 Suggestions on Reformation of Lending Service to SME .......... 39

5.1.1  H Bank's Guarantee for SMEs ................ 39

5.1.2  Suggestion for Banking service restructure under H Bank's  guarantee……………..39

5. Recommendation

Chapter  five  elaborates  the  improvement  and  suggestions  of  financing  system  for SMEs,  includes  the suggestions  of  credit  structure  reforming  and  suggestions  of implementation of the system. 

5.1 Suggestions on Reformation of Lending Service to SME

Restructure the lending service to SMEs is quite import. And it will be a new profit growth  to  H  Bank  (China)  Corporate. The  coming  paragraphs  will  try  to  bring forward some suggestions to H Bank (China) Corporate’s SMEs Financing.

5.1.1 H Bank’s   Guarantee for SMEs

The  H  bank  should  formulate  policies  to  facilitate  them  to  lend  to  the  SMEs,  or provide good incentives for the banks to lend to SMEs willingly, and increase the ratio of bank loans to SMEs to at least 10%. Meanwhile, financial institutions issuing loans to SMEs can be exempted from business tax. Relevant organizations and individuals transferring or  leasing  patents  to  SMEs  can  also  be  exempted  from,  or  have  a deduction of, business taxes. 

It  is  advisable  and  important  for  local  head  office  at  various  levels  to  establish guarantee  institutions  and provide  guarantees  for  SMEs  using  locao  funding  to  help them garner loans from financial institutions or issue bonds at the bond market. First, the  access  to  guarantee  companies  needs  to  be  opened  further  with  simplified approval  procedures.  Second,  the  scopes  of  tax  break  policies  for  guarantee companies should be increased, reducing and exempting them from income tax. Third, the rate of risk provisions should be increased above the current rate of 30%. Finally, the  risk  decentralization  and  compensation  system  of  guarantee  companies  and national  re-guarantee  institutions  should  be  firmly  established.  However,  the government  should  be  careful  to  avoid  a tendency  to  over-guarantee  without considering the probability for repayment. The guarantee provision should be modest and increase the chances of hitting the optimal level of guarantee.

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6. Conclusion

This  thesis  mainly  analyzes  the  financing  system  of  H  Bank  (China)  Corporate  for SMEs financing and finds out some disadvantage of it with raising several available suggestions as below. First, suggest H Bank (China) Corporate to reform its lending Service  to  SME,  included  getting  support  from  governmental  guarantee,  and  reform the banking service  system.  Second,  suggest  H  Bank  (China)  Corporate  to  do  more financing to SME which is to be the new engine for profit in China. 

Small business banking consists of a multitude of markets of varying sizes serving the different  needs  of  different  small business  groups.  While  most  small  business  bank loan markets are small local markets, large regional or even national markets for small business  credit  lines  have  also  developed.  Most  major  small  business  bank  loan markets in China have become even more competitive. The continued presence of a large  number  of  profitable  community banks in  many  local  and  regional  markets facing  the  encroachment  of  large  national  and  regional  banks  is  testimony to  the competition in the small business banking markets in China. 

This explains why most small firms have indicated little concern about the availability of  credit  over  the  past  decade. However,  H  Bank  (China)  Corporate  continues  to compete on terms other than pricing—that is, competition in the small business loan markets  is  characterized  by  mostly  competitive  pricing.  Declines  in  the  cost  of borrowing to small firms over the past decade are mostly the result of ample liquidity available to the banking industry and in the overall financial markets in China.

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