The financial system

The financial system, as a key factor for sustainable economic growth in developing countries, is an important issue in economic growth. This paper examines the problems of financing in China, small and medium enterprises. , The author presents some theoretical and empirical studies on the recent financial situation surrounding small and medium enterprises in China. He then presented his view, based on the results of hearings held with small and medium enterprises and commercial banks in Shanghai and Amoy.

Transition of China's planned economy to a market economy. During this transition, the legal and accounting systems have undergone numerous revisions to catch up with the changing economic regime. It is easy to imagine, the move largely lacked consistency and coherence, as it was a series of trials and errors of disparate measures.

As a result, many small and medium enterprises are highly limited in their bank loans and other financial assets acquisitions official channels. Despite this, small and medium enterprises have achieved remarkable growth and have contributed greatly to the Chinese economy. In this article, the author emphasizes that the existence of informal rules based on trust such as reputation, geographic or family ties ( "the reputation and relationships"), has not only helped to finance small and medium-sized enterprises, but has also worked as an engine to stimulate growth of small and medium enterprises.

The capital financing small and medium enterprises in China, where legal and accounting systems are poorly developed and strong asymmetric information between lenders and borrowers of capital exists, is not easy, even in a financial system based on bank loans, in which the disclosure of correct information is necessary, and even less in a financial system based on capital markets (stock market), which strongly demand transparency of information. Given these restrictions on the financial system, financial markets informal and reputation, geographic or family ties, and other "relationship of trust" the devices are important to complement formal capital market.