Abstract
This article examines changes in Chinese high-tech SMEs’ access to both bank and informal finance in response to the institutional changes relating to the private sector and financial transactions. It draws upon two rounds of face-to-face interviews with the owners of high-tech SMEs and finance providers in the Chinese provinces of Guangdong and Guangxi covering two consecutive time periods: from 1998 to 2004 and then from 2004 to 2009. The findings show that the effects of the changes in institutional regulations on the availability of finance to high-tech SMEs vary according to the type of finance provider. Access to informal sources of finance grew, including to longer-term equity finance, whereas that to bank finance did not significantly improve.
Notes
1. High-tech SMEs in this study are from ‘high-tech industries’, following the definition of the China National Bureau, incorporating electronics and information technology, bioengineering and new medical technology, new materials and applied techniques, advanced manufacturing technology, aviation and space technology, modern agriculture technology, new energy and high-power conservation technology, environment protection technology and nuclear-applied technology.
2. Start-up stage: Firms have just registered and their products/services are being developed and initial potential customers are being validated, and would normally not be trading and not making a profit.
Early stage: Firms are producing products and services for early customers but would normally be unprofitable. Exceptionally, it is possible for specific firms to be profitable (e.g. the owner builds up a good relationship with the customers prior to establishing their business and have low front-end development costs).
Later stage: Firms normally have significant revenue growth and have generated profits for several years. However, it is possible for some later stage firms to temporarily dip into unpredictability in terms of sales turnover and profitability (e.g. a firm might be required to invest a large amount of capital in either fixed asset acquisition or R&D simply to sustain the business).