China’s government has launched a survey asking small and medium-sized businesses about the difficulties of accessing loans amid reports about inaccessibility.
The Ministry of Industry and Information Technology will seek feedback on SME borrowers and use it for future government decision making, according to a statement.
The survey will be open to all SMEs and will inquire for four things: current financial situation; loans obtained since the outbreak began; need for interest payment deferral; and difficulties in accessing loans – a key issue highlighted by reports claiming reluctant lending due to lacking collateral and higher default risk.
And while the desperate have been unable to fill their dire need for credit, relief loans issued elsewhere have been suspected of misuse in areas such as property purchases in Shenzhen.
Backbone
Perhaps more than any other major economy, Chinese banks have an established legacy of great focus on borrowers with very low default risk or state support in implicit or explicit form. In theoretical practice, this is often the most effective in a planned economy like China which prides itself on creating giant conglomerates or new age unicorns. But with any economic model, SMEs are often the cliched backbone of the economy and China is no exception.
According to data from the ministry, China is home to 30 million SMEs which represent 80 percent of the country’s jobs, 60 percent of GDP and 50 percent of tax revenue.
Meanwhile, conditions may be critical with a survey jointly conducted by Peking University and Tsinghua University in February that said over 85 percent of SMEs would collapse within three months without financial assistance with less than 10 percent claiming they could last for half a year.
