Experts Calls for Relaxing Financial Restrictions on SMEs

飞雪寒冰

Financial restrictions should be eased to encourage domestic acquisitions and mergers, especially for small- and medium-sized enterprises, and private firms, Zhang Wenkui, a deputy division chief of the Development Research Center of the State Council, said in Shanghai on Oct. 24.

Industrial consolidation should also allow room for smaller, innovative companies, he said at a financial forum.

The review mechanism for listing on the growth enterprise market board is too rigid and "no different to the one for the SME board," Zhang said.

A market pricing mechanism can only be achieved with a loosely regulated capital market, in which small firms can realize acquisition deals by issuing additional shares or through a share swap, he said.

Last year, the China Banking Regulatory Commission issued a new rule allowing commercial banks to extend loans for acquisition and mergers. However, the rule contradicts the Lending General Provisions issued by the central bank in 1996, which prohibit borrowers from using bank loans for equity investment.

A reform of the financial mechanism is necessary, Liu Ji, honorary director of China Europe International Business School, said.

飞雪寒冰

Firms' core competitiveness and the financial support of banks are essential to acquisitions and mergers, he said.

Chinese firms are facing opportunities for cross-border acquisitions, and the authorities should study the possibility of acquisitions of large firms by smaller, competitive ones, Liu said.