ASSET FINANCE AND COOPERATION WITH FOREIGN CAPITAL
The most effective measure for promoting SME financing is to utilize foreign know-how in the asset finance field. The primary factor that hinders the growth of the Chinese SME financing market is immature risk management systems.
In the asset finance based on lease and asset based lending, risk management is easy compared with the case of land-collateral bank loans, and so it is considered an effective financial service in emerging countries where financial systems are to be matured.
It has not been long since asset finance was introduced to China on a full-scale basis. Accordingly, a framework for effective regulations has not been established and managerial resources, including funds, professionals, and products, have not been accumulated. The foreign-affiliated financial institutions in Japan, the U.S., and Europe are more experienced, because they survived repeated financial crises and developed relatively stable financial systems based on the cooperation between the public and private sectors.
COLLECTIVE INVESTMENT SCHEMES
For the utilization of asset finance for promoting Chinese SME financing, I hypothesize that it is indispensable to take measures for steadily distributing the above mentioned financial instruments of lease and asset based lending to the market and it is effective to apply collective investment schemes utilizing the liquidity in China or the overseas capital market. From this perspective, too, cooperation with foreign-affiliated firms is essential.
(1) Asset finance securitization markets
The establishment of a securitization market for repackaging lease receivables, which have been handled by lease firms in China, as the investment products for investors inside and outside China would be effective for securing additional capacity and advancing risk management.
In advanced countries, the products securitizing such asset finance receivables have been distributed, and so issuers, including lease firms and investors, can share benefits and risks.
(2)SME investment vehicle markets (SIV markets)
The Microfinance Investment Vehicle, which is a collective investment scheme for microfinance, has been diffused by pioneering asset management firms, such as Blueorchard, and its scale in the global market is about 4 billion dollars.
In the Chinese market, the fund supply for microfinance is saturated, and the roles of MIV are limited, but SIV for asset finance, including lease, would become an effective option for securing additional capacity and advancing risk management like the securitization market.