The incomplete and slow developing financial system in China has discouraged finance institutions, especially banks, to lend money to small and medium-sized enterprises (SMEs), Wu Xiaoqiu, head of the Finance and Securities Institute at the Renmin University of China, told Thursday's China Entrepreneurs Summit.

An important part of this year's China Hi-Tech Fair, the summit focused on the difficulties faced by Chinese SMEs in seeking financing.

"Banks have to face high risk and heavy costs while granting loans to SMEs in the existing financial climate, which features tight government control and a lack of related stimulating policies," said Wu. He suggested that the government adopt a flexible tax policy to encourage finance institutions to lend money to SMEs.

Lagging development in the country's stock market also contributed to the difficulty of SMEs' obtaining finance, Wu said.

Dean of HSBC Business School of Beijing University, Hai Wen, said that, while the development of SMEs was conducive to creating employment, small finance institutions should be encouraged and supported to develop to serve SMEs.

"The development of small finance institutions is very slow," said Hai. He said that while innovative technological SMEs could always have diversified sources of finance, such as venture capital, traditional SMEs sometimes could only depend on small finance institutions.

Private capital should be regulated and encouraged to support traditional SMEs, Hai said.

Zhu Daxin, chief executive officer of Shenzhen QCDO Technology Co. Ltd., said SMEs had to set a unique development mode to attract investors.

Zhu's company received investment from venture capital in its development.

(Source: szdaily.sznews.com/html/2011-11/18/content_1829046.htm)