Boao Forum

On Saturday, a report on the financing of small businesses was delivered at the 2013 Boao Forum for Asia in Sanya...

With a senior Chinese economist calling for deregulation of interest rates for loans issued to small businesses.

PKG

Ba Shusong is one of China's most top financial researchers, working with the State Development Research Center under the State Council, or China's cabinet...

And he says small businesses still face huge hurdles in finding financing.

According to his financing satisfaction research, more than 40 percent of small businesses surveyed borrowed money to expand last year... With banks a major financing channel.

More than 66 percent list bank loans as their first option... but say "a long wait for the loans" proved a common problem...

And the researcher says, as interest rates become more market-based, micro-finance institutions should target small businesses, and serve them in a different way from the big banks, to address their specific needs.

SOUNDBITE (CHINESE) BA SHUSONG, State Development Research Center:

"We've seen that China's finance sector has responded to small businesses' demand change. It's made innovations on mortgage ways, and improved financial lending and supply chain finance. Some export-oriented firms have shifted their focus to the domestic market to cut inventories and boost liquidity."

In this way, the researcher says, micro-finance institutions can profit from their normal operations...

And that well-performing small-loan companies should be allowed to transform into banks at village and township levels, to better serve small businesses.

Last year, China's GDP growth stood at 7.5 percent, its slowest pace, in 13 years.

Some analysts say inefficiency is still a problem in many state-owned enterprises... Which remain the heavyweights of China's economy, employing 80 percent of the country's workforce.

But President Xi Jinping says this has to change - and that for China's economy to become more competitive and dynamic, smaller players need to be given a shot.

With the promise of more government support, many small firms are upgrading their resources and trying to boost innovation...

SOUNDBITE (CHINESE) BA SHUSONG, State Development Research Center:

"The current industrial shift has provided investment channels for venture capitals. Enterprises are extending their business to upstream and downstream, and this will offer lending opportunities for financial institutions. So financial services should follow up and so should relevant policies."

But others say, for that financial services to grow, a strong administrative framework, is essential.

SOUNDBITE (CHINESE) YAO WANG, Executive Director, Boao Forum for Asia:

"We should draw on experience from developed countries. A sound legal system should be in place, to help small and medium-sized businesses in their financing. Besides, governments should bear the responsibility to assist small businesses. "

China's small businesses have developed rapidly over the past decade.

But to ensure they continue to grow, it's up to China's legislature, banks and the firms themselves, to play their role.