The new document - Measures for Equity Pledge Registration with Administration for Industry and Commerce, which took effect on October 1, provides a new low-cost financing channel for money-hungry SMEs in the country.

According to the document, equities that may be used as pledges are confined to equities in limited liability companies and stock limited companies, excluding equities in stock limited companies already registered with securities registration and clearing organizations, and "equities with problems", that is to say, equities that have been frozen by the court.

Meanwhile, China has built a multi-level credit guarantee system for SMEs. China has established 3,366 credit guarantee institutions for SMEs with an accumulative guarantee fund amounting to 805 billion yuan, said Zheng Xin, an official with the National Development and Reform Commission (NDRC).

These credit guarantee institutions have completed credit evaluation and credit information collection on more than 200,000 SMEs, helping insured enterprises to add sales income totaling 342.5 billion yuan, increase profits and taxes of 26.8 billion yuan, and to offer 1.5 million new employment posts.

PBOC will also propel SME-prone financial innovations to ease the fund shortage of SMEs this year, said Yi Gang, vice governor of the bank recently.

According to Yi, financing products for non-financial corporations such as corporate bonds, short-term financing bills and mid-term notes will be actively promoted in the future so as to enlarge the financing channels of SMEs.

To add more credit loans to SMEs, China has piloted small-sum loan companies tailored for SMEs.

In May, China Banking Regulatory Commission and PBOC jointly issued guidelines for piloting small-sum loan companies across the country.

After three months preparation, east China's Shanghai has approved the setting up of 17 small-sum loan companies in 10 suburb districts under the city. Three such companies have gone into business in Baoshan District, Songjiang District and Puding New District respectively.

Li Yueru, general manager of the Baolian small-sum loan company in Baoshan District, the first going into operation on November 15, has received 400 visitors from all walks of life in two weeks.

The private business sponsored loan company, with a registered capital of 50 million yuan, is a lender to provide small-sum loans mainly to small businesses and farmers. It is not permitted to take public deposits and its capital sources are mainly from shareholders, donations and finances from banks.

"We charge interest at a rate ranging from 0.9 to 4 times that fixed by the central bank for same grade loan services in commercial banks. Since the interest rates are much lower than the black market, we are welcomed by SMEs. Our clients largely come from the manufacturing and financial investment sectors, and half of them come from other districts or other cities," said Li.

Meanwhile, CASME has initiated a 3-billion-yuan venture investment fund as a step to help the country's SMEs raise capital, the body said on November 24. The fund will be established by the end of this year.

CASME will also issue an SME corporate bond with the northeastern Liaoning provincial government. It will found a bank with a planned registered capital of 10 billion yuan, according to CASME.

"Upon its establishment, the bank will provide loans only for SMEs. Companies may get as much as 5 million yuan each for their investment and development," said CASME head Li Zibin without specifying when the bank would open.

Officials propose SMEs to adjust the credit structure to survive the financing difficulty. To promote the development of the bond market and direct financing either abroad or on the SMEs board in Shenzhen bourse, were key measures to ease the pressure, said Liu He, deputy director of the Office for the Central Leading Group on Economic and Financial Affairs.

Restructuring

Apart from improving access to loans, the Chinese Government has taken other measures to support SMEs. For example, it has raised export tax rebates three times so far during the second half.

China raised tax rebates on November 1 for 3,486 items ranging from labor intensive industries such as textiles, garments, toys, hi-tech and high-added-value sectors like anti-AIDS drugs.

Wang Liming, director general of the SMEs department of the Ministry of Industry and Information Technology (MIIT), said the country might further raise the tax rebates rate by one percentage point for some labor-intensive industries in the near future to help them cope with shrinking profit margins because of slacking market demands, the yuan's appreciation and rising production costs.

In addition to all this support, the government is encouraging SMEs to accelerate industrial restructuring and innovation.

"The financial crisis has exposed some interior problems with our enterprises," said Li Huiwu, deputy director of south China's Guangdong Provincial Development Research Center.