On Credit Rationing of China’s Small and Medium-sized Enterprises

Abstract: Small and medium-sized enterprises are the sigficant parts of our country economy, financing is a crucial link in the development of small and medium-sized enterprises. The characteristics of small and medium-sized enterprises have determined that the main way of their external financing is the bank credit. The financing difficulty they face mainly in the loan market is the key factor that puts a curb on the development of small and medium-sized enterprises. Therefore, it is of great importance in theory and practice to study the mechanism of small and medium-sized enterprises’credit rationing and to find the basic reason of small and medium-sized enterprises’credit rationing.Firstly, I develop a credit rationing model under asymmetric information, by introducing the variable of scale of the enterprise and risk variable, based on the analysis of S-W model (Stiglitz&Weiss,1981). I analyze credit rationing of the interest rate as a screening mechanism under competitive market structure and monopolistic market structure, and study the dynamical effect on credit rationing of small and medium-sized enterprises when the interest rate and the market structure change. The model indicates that the effect of favorable selection will cause smaller enterprise more likely to withdraw the loan market when bank income is certain and the interest rate rises, because smaller enterprises are relatively risky. At a certain interest rate required by banks, there is the scale erect on bank loan, and the smaller enterprises under a certain scale can’t get a loan. With an increase of bank loan’s cost, the critical scale will move upwards. When credit rationing is in equilibrium, the credit of smaller enterprises is rationed. If the proportion of smaller enterprises in whole enterprises is relatively large, the extent of credit rationing is large too. Whether the liberalization of the interest rate can shrink the extent of credit rationing will depend on the difference between the limited interest rate and the equilibrium interest rate under monopolistic market structure, and on the degree of asymmetric information and the degree of risk.Secondly, I develop a model of moral hazard and a model of adverse selection by introducing the variable of collaterals further. I analyze the influence of moral hazard and adverse selection on credit rationing of small and medium-sized enterprises under competitive market structure and monopolistic market structure, and the range of and the condition of the impact of collateral on credit rationing of small and medium-sized enterprises. The model of collateral as a screening mechanism shows that when credit rationing is in equilibrium, the credit of smaller enterprises is still rationed. Collateral requirement increases with decrease of the competition degree, and the extent of credit rationing increases with increase of collateral requirement. The extent under monopolistic market structure is bigger than the extent under competitive market structure.Finally,, the study on credit rationing in China in this dissertation really devotes to discuss roundly institutional backgrounds and microeconomic mechanism of credit rationing in transition economy in China through exploring disequilibrium credit rationing owing to exogenously institutional constraint and equilibrium credit rationing owing to endogenous facts in credit market, and then base on it to further analyze some relative important problems in the credit market, such as efficiency of allocation of credit resource in China, financing plight of Small and Medium-sized Enterprises. the frame of“double credit rationing”is used to analyze the serious problem about the financing plight of Small and Medium-sized Enterprises; explains the reason of financing plight of Small and Medium-sized Enterprises based on the frame of“double credit rationing