After decades of unprecedented growth China now needs a new growth model based on innovation and higher value manufacturing and service. Focusing on the right areas to enhance its innovation ecosystem will be important and SMEs may have to be at the center of this; SMEs are key drivers of innovation in most countries.
Countries like Germany have fully taken advantage of this SME strength, but China has significant work to do to address obstacles its SMEs face. There are several obstacles, but two are the focus of this paper: the lack of access to low-cost finance and the significant inefficiencies in their financial supply chain. Other issues, notably human capital and fair regulation and rules of law are of great importance too.
Based on this scope and MasterCard’s global assessment and China’s position, it is suggested China could implement a number of measures to address the obstacles faced by SMEs including – 1) Subject SOEs to market discipline 2) Develop an SME lending focus 3) Reform its interest rate regime and 4) Leverage innovative solutions to improve financial supply chain efficiency.
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