China should legalise its underground financial markets which have grown popular among credit-hungry small and medium-sized enterprises (SMEs), an official from the State Development and Reform Commission said yesterday.
'SMEs are starving for loans and [the obtaining of loans] has become a matter of life or death for them,' Zhang Hanya , director of the State Development and Reform Commission's Institute of Investment Research, was quoted as saying by the 21st Century Economic Report.
Instead of being seen as 'evil', informal credit services like underground money houses should be seen as providers of financial options to cash-strapped SMEs, Mr Zhang said.
The recent round of macro-control measures imposed by the central government had intensified the funding problems facing such firms, especially those in rural areas, he said.
More than 85 per cent of companies whose annual revenue is below 5 million yuan - the benchmark for SMEs - had been turned down by commercial banks when applying for loans, a recent study conducted by the Chinese Academy of Social Sciences' Private Economy Research Centre showed.
A separate survey of China's 11 commercial banks drew a similar conclusion. SMEs find themselves two or three times more likely to be refused by lenders than their state-owned counterparts.