China MSME Finance Report 2017（ Compact Edition） 0 SHI JIAN PING Mintai Institute of Finance and Banking China MSME Finance Report 2017（ Compact Edition） China MSME Finance Report 2017（ Compact Edition） 1 2017 Mintai Institute of Finance and Banking / Central University of Finance and Economics Room 107, ZhuanJia Hotel No. 39, South College Road, Hai Dian District Central University of Finance and Economics Beijing, 100081 China Telephone 86-10-62289768 E-mail / All rights reserved This work is a product of the faculty of Mintai Institute of Finance and Banking / Central University of Finance and Economics CUFE. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the official of Central University of Finance and Economics or Chinese governments. Central University of Finance and Economics does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this report is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. For permission to photocopy or reprint any part of this work, please send a request with complete ination to Mintai Institute of Finance and Banking, No. 39 South College Road, Hai Dian District, Beijing100081, China; Telephone86-10-62289876; E-mail The Chinese version of China MSME Finance Report 2017 has been published by CHINA FINANCIAL PUBLISHING HOUSE. All queries on rights and licenses of the Chinese publication should be contacted with CHINA FINANCIAL PUBLISHING HOUSE; Telephone 86-10-66070833/62568380; E-mail ISBN 978-7-5049-9243-7 China MSME Finance Report 2017 China MSME Finance Report 2017（ Compact Edition） 2 Acknowledgments The Chinese version of this report has been prepared by a core team led by Shi Jianping and Yang Rubing, comprising Chen Yan, Guo Lan, Guo Yueming, He Xuanyu, Leng Xiyuan, Li Shan, Liu Tongtong, Ma Lijuan, Ma Sanyang, Ma Yifei, Shi Kai, Shi Jiuhong, Wang Jian, Wang Tingting, Wang Wanting, Wang Wei, Xie Junyao, Xie Zichang, Xu Xiaohua, Xu Yuancheng, Xue Yu, Yan Siyu, Yuan Bing, Zeng Lianyun, Zhang Hongbin, Zhang Jie, Zhang Yifan, Zhao Jianchuan. Wang Wanting was responsible for the translation of this English version. Deeply appreciate the scholars and experts who patiently accept our research and consulting on MSME finance. Their study provides very professional advice and practice experience. This report condenses their wisdom. China MSME Finance Report 2017 China MSME Finance Report 2017（ Compact Edition） 3 Preface In 2016, the downward pressure of Chinas economic development decreased, but the structural conflict was still very prominent, some regions had surfacing asset bubble problems, especially the financial Virtualization caused worries of the regulators. Investigation indicated that the development situation of micro, small and medium-sized enterprises MSMEs slightly improved in the fourth quarter of 2016, but the overall surviving environment and development situation were still not promising. Meanwhile, active changes were also happening, driven by the Mass Entrepreneurship and Innovation MEI and affected by commercial system re, main market players have maintained the trend of prosperous growth, the number of newly registered enterprises grew quickly, the number of employees in individual and private enterprises grew stably, and newly established small and micro enterprises developed actively. The two pure online banks that have no actual outlet at all realized services to massive number of small and micro clients and broke even within less than two years, which was a surprise in the industry, it has reflected the huge potential of technology in the field of micro financing. Financial TechnologyFintech replaced Internet Finance and became popular in the business circle, the Digital Inclusive Finance was given high hope for solving the problem of difficult and expensive financing of small and micro enterprises. The application of technologies such as internet, big data, cloud computing, artificial intelligence and block chain in financial field not only derived to various emerging financial products and services, but also penetrated to traditional finance. After the transation of the big elephant --- traditional financial institutions that are represented by commercial banks since 2015, in 2016, traditional financial institutions and financial technology enterprises joined hands to seek business cooperation, the steps of joint creation of commerce-finance ecology was further accelerated. The loan balance of small and micro enterprises in commercial banks continued to grow, but at a lower growth rate compared that in 2015, especially for joint-stock banks that had the sign of weak growth in 2015, the growth rate further slowed down, some joint-stock commercial banks even had a double-digit negative growth. Although the credit risks of small and micro enterprises were mitigated in 2016, before the comprehensive macroeconomic recovery, the pressure of risk control of China MSME Finance Report 2017 China MSME Finance Report 2017（ Compact Edition） 4 small and micro enterprises is still considerable. But exploration and innovation had never stopped their steps, in 2016, we saw some banks deeply ploughed the supply chain finance, explored service plat and cooperation scope, promoted supply chain finance to develop towards the online, scenarized and dynamic direction, provided the medium-sized, small and micro enterprises within industrial clusters with broader financing supports; some banks have actively tried investment-loan linkage under policy supports, and explored new financing models for technology-type medium-sized and small enterprises; more banks further upgraded the Internet model, accelerated their steps of placement in financial technologies, and took advantage of frontier technologies to seek transation and development, they are poised for great development on the path of using technologies to enhance service efficiency, reduce service costs and get closer to clients. Meanwhile, we saw that the development trend of industries returning to their origins became even clearer in 2016, the selection of the superior and elimination of the inferior still went on, and the effect of which further appeared. The micro credit company is undergoing a Big Shuffle under the competitions from traditional financial institutions such as banks and internet finance, both the number of institutions and loan balances had Double Decrease for the first time; Pawnshops had negative growth for the first time, while returning to the pawn of civilian goods and developing the unique advantages of pawn became a hot topic of the industry; The P2P online loans had the First Year of Compliance, the internet crowd funding had market test and launched the process of rational return. In 2016, the amount and number of cases of entrepreneurial investments didnt have apparent increase, although the internet field ranked top of investments, the investment amount turned downwards for the first time in 2016 since its explosive growth in 2013, the voices advocating and following rational investment became increasingly clear and firm. Targeting the problems of financing lease cross-border channel businesses, the regulators increased the regulatory level, the tightening of financing lease cross-border channel businesses is expected to promote financing lease to return to the essence of assets leasing, to better serve the real economy and benefit the medium-sized, small and micro enterprises. In 2016, the credit system construction continued to dig deeper, the unified registration system of movable asset finance further explored, the receivables financing service plat quickly developed, and the construction of multi-layer assets market accelerated. 2016 was also the year with the most regulatory actions in the capital market, Strict Regulation, Lawful Regulation and Comprehensive Regulation as well as Protecting Lawful Rights and Interests of Investors became a China MSME Finance Report 2017（ Compact Edition） 5 clear regulatory direction. Out of the worry about the excessive expansion of financial system and the problem of the disjoint from the real economy, the regulators determined the policy keynote of Returning to Essence, Promoting the Real Economy; Strict Regulation and Risk Prevention for the financial industry, and required finance to return to the origin of serving the real economy, and distribute more financial resources to the key fields and weak links of the economic and social development. It was also in this year when the State Council ally issued the Plan for Promoting the Development of Inclusive Finance 2016-2020, which set an important policy foundation for the development of inclusive finance, including small and micro finance. The improvement of financial infrastructure, the rebuilding of market order and the guidance of radical re policy will generate important and far-reaching influences on the development of financial service to Chinese small and micro enterprises. This year is the 9th year since we issued this annual report, the entire members of the research group made joint efforts, adhered to the principles of Objectivity, Neutrality and Prudence, and ed basic judgments on various financial institutions/market-service small and micro enterprises through careful data collection, processing and analysis, in-depth industrial researches, and wide opinion collection. Years of vertical follow-up researches and horizontal correlation analysis across main institutions/markets enabled our researches to seize the most detailed changes, to observe internal causes under various surfaces, so as to better provide the development logics of the small and micro enterprises financial service market. I think this is the biggest value of this report of ours. We would like to thank the frontier practitioners, business experts and scholars of small and micro finance, especially the friends who served as industrial editing experts, they provided our researches with very professional suggestions and practical materials for free, and this report is also a product of their wisdoms. We would also like to thank the publishing team of Director Wang Xiaoduan of China Finance Publishing House for their consistent supports, the strict editing and quality control enabled this report to be provided to everyone with the best quality. Lastly, we would specially thank our dear readers, its your attentions and recognitions that enabled our researches to last to these days, facing increasingly higher expectation, we also felt pressure, only continuous and better researches could worth the trust everyone put in us. We hope our efforts in this year could continue to be recognized by you, welcome to follow the WeChat public account of Mintai Institute of Finance and Banking CUFE, and leave your valuable opinions and suggests. China MSME Finance Report 2017（ Compact Edition） 6 1. Micro, Small and Medium Enterprise MSME Financial Service System This report classified the financial service system of medium-sized, small and micro enterprises1 include five main categories, namely banking financial institutions, insurance institutions, other financial institutions/pseudo-financial institutions, financial market and inal finance for further details, please refer to Figure 1-1. Figure 1-1 MSME Financial Service System Among banking financial institutions, the institutions that were involved in the field of financial service of medium-sized, small and micro enterprises included policy banks, China Development Bank, Postal Saving Bank, large-scale commercial banks, joint-stock commercial banks, city commercial banks, foreign banks, rural small and medium-sized financial institutions and non-bank financial institutions, in which rural small and medium-sized financial institutions could be further classified into two types, namely rural cooperative financial institutions and new rural 1 The financial service system of medium-sized and small enterprises in broad sense include not only service institutions and markets, but include also other service intermediaries and service environments; in order to emphasize the key of this report, the system here will only include main service institutions and markets. China MSME Finance Report 2017（ Compact Edition） 7 financial institutions, rural cooperation financial institutions include rural credit cooperatives, rural cooperative banks and rural commercial banks; new-type rural financial institutions are comprised of village or township banks VTBs, lending companies and rural mutual cooperatives. In non-bank financial institutions, organizations involved in MSE financial services mainly include trust companies and financial leasing companies. Besides banking financial institutions, those involving in MSEs financial service also included the other financial lease companies than the financial lease companies attributable to banking financial institutions, micro-loan companies, pawnshops, venture capital institutions, financing assurance companies, collateral security management companies and commercial factoring companies1. In the aspect of financial market, there were over-the-counter markets and bond markets, in which over-the-counter markets include growth enterprise market, middle and small capital stocks market and street market. Besides, there was inal finance, including the financial service other than al finance. Lastly, besides the institutions focusing on providing financing services, there were the types of financial institutions, such as insurance institutions that don’t directly provide financing but provide risk management services. 2. Compositions of MSE Loan Types Among MSMEs financial services, loan service is one of the major types. In pace with the practical development of MSEs financial services provided by financial services, especially commercial banks, compositions of MSE loan types are further specified. The summary and definition of our team are as follows, generalized MSE loans can ally be divided into two types, one incorporates MSE loans offered through the of enterprise loans, namely, small enterprise loans and micro enterprise loans collectively referred to as MSE loans in narrow sense, while the other consists of loans to individual business owners and loans to MSE owners, both offered through the of personal loans See fig. 2-1. 1 Some of these institutions were not clearly defined as financial institutions by laws, or regulatory regulations, but considering the financial nature of their en