A credit bank loan of US$19 million would be a dream to every small business owner. But the China Construction Bank has granted it to a company registered with only US$8.7 million.

Xie Hong, a 40-year-old private owner of a baby food company in east China's Zhejiang Province, accepted a certificate of the credit loan from Chang Zhenming, governor of the China Construction Bank earlier this month.

Founded in 1999, Xie's company, the Zhejiang Beiyinmei Technology and Industrial Co., produces infant food. Revenues from its brand name products have sustained a high growth for four years in a row, reaching 200 million yuan (US$25.6 million) in 2004 and targeting at 500 million yuan (US$64 million) by the end of this year.

The credit loan was to bolster the business take-off of Xie's company. Having experienced the hardships of financing, Xie was finally relieved from the plight of applying for loans.

The China Construction Bank, the third largest lender in China, has recently given similar sums of grants to a dozen well-performing small and medium-sized enterprises (SME).

"An SME must pool its resources on the main business operation, develop a steady and committed executive board and establish a decent loan repayment credit, in order to get a high quota of credit, " said Xie, who was generous to share his experience for obtaining loans with other SME owners.

Like small companies everywhere else in the world, most of China's SMEs have difficulty in sourcing capital and venture guarantees. In the 1930s, the British Financial Industry Committee put forward the famous "Macmillan Gap" concept in its report, which means the predicament of a lack of long-term finance available for the SMEs.

 "The SMEs are often unable to ask banks for a loan because they usually venture at a high risk and fail to obtain enough assets to take mortgage loans," said Zhou Pingjun, head of SMEs department of China's National Development and Reform Commission.

China established a fund to support technology-based SMEs in 1999, which has accumulated 3.8 billion yuan (US$470 million) to finance 6,186 technical innovation programs launched by SMEs nationwide.

In recent years, the Chinese government and financial institutions have been committed to expanding expenditure from the public finance to support SME development. Banks are expanding lending to the SMEs, offering new financial services and widening financial product mixes to cater to the need of small business development, said Zhou.

The China Construction Bank has viewed financing SMEs as a strategic objective, said Chang Zhenming, governor of the bank.

The bank signed a cooperation agreement with the Zhejiang Provincial Government in August promising to increase credit loans to SMEs by 60 billion yuan (7.5 billion US dollars) in the east China economic powerhouse in the following three years.

The Chinese government has also encouraged SMEs to go public directly by approving the launch of a second board on the Shenzhen Stock Exchange for the listing of the SMEs in May 2004.

There are over 3.6 million SMEs registered in China, contributing to 55 percent of the country's gross domestic product and offering 75 percent of job opportunities nationwide.

(Xinhua News Agency September 9, 2005)