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Four, the banking industry's efforts to increase the amount of small and micro credit and reduce the price lack internal and external environmental support. China's economy is currently in a weak state of consolidation, and the profit and living space of small and micro enterprises are still narrowing. Although the country has issued a series of stimulus policies and some economic data have improved, the overall situation is not optimistic. In the first two months of this year, the profits of industrial enterprises dropped by 24 percentage points from the same period last year. In the first quarter of this year, the national tax revenue was 460.6 billion yuan, up 5.4% year on year. We cannot judge whether the U-shaped economy has bottomed out. In March, 2.86 trillion yuan of social finance and 1.69 trillion yuan of credit were added. The leverage pressure and positive stimulus to the real economy brought about by large-scale credit can only be verified in the future. We can look at the statistics of the National Bureau of Statistics on industrial enterprises above designated size.The chart shows the worst hit businesses are the smaller, private firms.
The article doesn't touch much on financial technology companies and micro-lenders, focusing instead on government policy and calling for state support. He raises some good points such as high customer acquisition, monitoring and management costs for banks, as well as the government's push for cheaper SME loans only serving to reduce bank profits on already costly loans. As for whether policy changes, who knows. SMEs are an important part of China's economy that need help more than ever, but the gap between rhetoric and action remains as wide as ever.
EO: 嵇少峰：中国银行业小微信贷已到最危急时刻
Sogou: Ji Shaofeng: Small and Micro Credit in China's Banking Industry Has Reached Its Critical Moment
As the central government continues to increase its policy guidance on lending to small and micro enterprises, the regulatory authorities are also pouring out sticks and carrots, and the amount of small and micro credit in the banking industry has risen and fallen. The situation seems to be in good shape. However, I would like to remind departments at all levels that it is now the most critical moment for small and micro credit in China's banking industry.
Where exactly is the crisis?
First, the current small and micro credit is promoted by short-term policies and there is no long-term sustainable institutional guarantee. Neither the guiding documents issued by the central government nor the requirements frequently issued by the Bank of China Insurance Regulatory Commission are formed policies and regulations, and there is no basic system for long-term implementation. The measures taken by various banks are more like to achieve quick success and instant benefits for KPI in a certain quarter. Most of the measures are simply and roughly raising the assessment index of small and micro credit, increasing the amount of loans by lowering the wind control bottom line, and even inflating small and micro loans by splitting loans and reverse collection. Few banks seriously carry out systematic layout and overall planning from the strategic level.
As small and micro enterprises have created great social value, the government should give certain economic support (cost) to credit institutions and small and micro enterprises when allocating financial credit resources to encourage and ensure banks and other financial institutions to provide credit assistance to small and micro enterprises on an equal and sustainable basis. For the convenience of writing, I define this cost as "the cost of social credit assistance". This cost, whether subsidized enterprises or subsidized banks, must be reflected in the profit model of commercial banks. It must be equal to or exceed the efficiency sacrificed and various increased costs incurred by financial institutions in providing credit to vulnerable enterprises, so as to promote the motivation of financial institutions to continue to invest.
At present, the government's approach is to force banks to release funds through policy guidance and regulatory regulation. Even if some economic support such as targeted downgrade and targeted refinancing is given, the losses incurred by banks cannot be covered. Therefore, although the current policies and measures can solve the temporary needs, if there is no supporting long-term and scientific rescue policy, the bank's attitude towards small and micro businesses in the future will definitely turn negative and passive.
Second, the current mode of small and micro credit is not market-oriented, and is premised on sacrificing the bank's economic interests. It runs counter to the bank's profit-driven business direction and therefore does not have a sustainable driving force.
If the bank's business objectives do not introduce social performance and raise it to a sufficient weight, its momentum to invest in small and micro credit is insufficient. However, if social performance is introduced, it may disrupt the modernization process of corporate governance in China's banking industry. Small and micro credit information is difficult to be symmetrical, inefficient and risky, so the principle of high interest rate and high cost is generally followed in the market. At present, banks should not only increase their investment but also maintain low interest rates, which has turned small and micro credit into social relief under special circumstances. I am not opposed to this kind of policy aid, and even strongly advocate it. In 2017, I wrote an article "Lack of social credit assistance costs, the root causes of financing difficulties for small and micro enterprises", calling on the government to invest enough assistance costs to ease the financing difficulties and high financing costs for small and micro enterprises. However, it is totally different from the government's establishment of a long-term relief mechanism for small and micro credit to allow banks to violate market rules in the short term. After years of reform in China's banking industry, the market mechanism has been initially established. If the function of financial assistance to small and micro enterprises is reintroduced into the banking system (as we have done for a long time in history), the greatest possibility is to allow banks to make the first move to both ends and return to the old path, which has taught us all the problems.
III. Sports-type small and micro credit delivery and large-scale policy support are forcibly injected into the market through administrative means, which may completely destroy the overall ecology of small and micro credit, resulting in large-scale losses or withdrawal from the market of small and micro credit institutions that previously operated commercially according to market rules. Lending at a loss, lowering the overall wind control, and greatly increasing the leverage of small and micro enterprises in a short period of time have all violated the laws of the market. Large banks have robbed the customers of small banks. Small banks can only maintain at a loss or sink further to become risk customers. Credit institutions of similar banks can only choose more dangerous customers or be squeezed out of the market directly. The overall downward pressure of interest rate level is likely to plunge professional banks and credit institutions that used to rely on a lot of manpower and patience to do small and micro businesses into losses and difficulties. Big banks can afford to sacrifice some profits, but how can small and micro characteristic banks like Tyrone and Taizhou stick to it for a long time if interest rates are lowered again? Small loan companies, pawn shops, factoring and other institutions with local licenses will not survive.
Of course, if large and medium-sized banks can persist in providing small and micro credit at a loss for a long time, and can guarantee both quantity and quality, then even if small banks and quasi-bank credit institutions disappear, it is not impossible for the whole society. But is it possible for big banks to insist on this kind of loss-making business for a long time? What mechanism can these banks use to ensure the balance between economic benefits and social benefits? How to design kpis? How can rent-seeking be avoided? How to Balance Non-performing and Income? Under the current bank management system, this is an almost impossible task. From the perspective of pure market and technology, this is also an impossible goal. Unless these banks are fully financialized, it is an illusion to expect them to realize these goals by relying on policy pressure and consciously assuming social responsibilities. Once the tide of big banks ebbs, there will be a long window of small and micro credit. The ecological reconstruction of small and micro credit shuffled by the flood will certainly not be completed in a short period of time.
Four, the banking industry's efforts to increase the amount of small and micro credit and reduce the price lack internal and external environmental support. China's economy is currently in a weak state of consolidation, and the profit and living space of small and micro enterprises are still narrowing. Although the country has issued a series of stimulus policies and some economic data have improved, the overall situation is not optimistic. In the first two months of this year, the profits of industrial enterprises dropped by 24 percentage points from the same period last year. In the first quarter of this year, the national tax revenue was 460.6 billion yuan, up 5.4% year on year. We cannot judge whether the U-shaped economy has bottomed out. In March, 2.86 trillion yuan of social finance and 1.69 trillion yuan of credit were added. The leverage pressure and positive stimulus to the real economy brought about by large-scale credit can only be verified in the future. We can look at the statistics of the National Bureau of Statistics on industrial enterprises above designated size.
From the perspective of key consumer goods market, China's auto sales volume in the first quarter of 2019 was 6.22 million units, a year-on-year decrease of 16.6%; Mobile phone shipments in the first quarter totaled 76.931 million units, down 11.9% from the same period last year. The merchandise trade surplus in the first quarter of 2019 was 12.5 billion U.S. dollars, which seemed to be a significant improvement over the deficit of 27 billion U.S. dollars in the same period last year. However, careful analysis found that exports increased by only 1.2% year on year, while imports dropped by 4.3%, with precision machine tools, diode semiconductor components, automobiles, soybeans, integrated circuits, etc. falling by 48.7% to 10% respectively. The import of these important means of production is shrinking, and what results will follow can be imagined. From the above data, it can be seen that the operating conditions of the entity enterprises have not significantly reversed. Just because a large amount of credit and liquidity injection has improved cash flow and given some respite, the profitability is still low and the overall situation is not optimistic.
Even for private enterprises above designated size, the operating conditions of small and micro private enterprises are obviously not going to be any better. Under such circumstances, banks have greatly leveraged small and micro enterprises. Credit funds either fill in the holes of weak enterprises or flow directly or indirectly to real estate, stock market and other places where appreciation space may be generated. Regulators have always thought that by strictly checking the flow of credit funds, they can plug this gap. In fact, funds are like water, regardless of rivers. Banks cannot control the ultimate use of enterprise financing. Market profit expectation is the highest rule of capital orientation. It is difficult for entities to make profits. Of course, the housing market and the stock market have become the best choice for capital. This can be seen from the boom in the stock market and the housing market in the first quarter of this year. Under the circumstance that the operating environment and profitability of small and micro enterprises have not been effectively improved, it is inevitable that risks will rise substantially when small and micro credit is put in at a large scale and at a low cost.
Five, China's banking industry still lacks effective technical and tactical support for small and micro credit.
Due to the low efficiency and high management cost of small and micro credit, large banks with large amount of funds and great institutional advantages generally do not attach importance to the technical and tactical research of small and micro credit in history. Since 2005, when the National Development Bank, the World Bank supported the contractor bank and Taizhou Bank to introduce the German IPC technology, up to now only IPC, credit factory and the "Three Products and Three Tables" or so can be used as the catchy small and micro credit technology. Unfortunately, these technologies have not been popularized on a large scale and have not evolved rapidly with the advent of the Internet and big data era. The development of micro and micro credit technology has been very slow for a long time. IPC is still severely limited by the cultivation and management of human beings, and its research and application on the Internet and other new technologies and scenarios that can effectively promote information symmetry are insufficient. The credit factory technology has only standardized the process and has not substantially solved the problem of symmetry between small and micro original data collection and basic information, resulting in serious homogenization.
The reluctance of big banks to invest key resources in small and micro credit technology and tactics and the inability of small banks to break through their own technological bottlenecks have led to the general lack of the ability of Chinese banks to control small and micro credit risks. The bank's research and development investment in small and micro credit technology and tactics has not touched on the focus of information symmetry work. Most of them only focus on the control of credit process and the implementation of pledge guarantee measures. They do not attach much importance to the development of information symmetry technology between banks and customers and are impatient to create an ecological environment for small and micro credit. Chinese banks are envious of the big data from Internet companies, but ignore their huge data and scene resources. The use of external economic environment, industry data and risk early warning information is often only kept in the work report of the leaders and seldom used to guide credit practice.
In recent years, many banks have encountered systematic risks of small and micro credit, causing them to turn pale at the mention of small and micro credit. They have lost their confidence in information symmetry and credit personnel and have unanimously turned to the pursuit of collateral. Although this is an expedient measure, it is indeed a lazy and incompetent choice from the perspective of the capacity-building of credit institutions. Banks that have suffered losses do not reflect on the causes of their own failures from the perspective of their own management and technology, but simply attribute the losses to small and micro credit itself, or even directly opt out of the small and micro market.
Objectively speaking, the Internet, big data and cloud computing have brought opportunities for the improvement of credit technology. However, no major breakthrough has been made in credit technology for small and micro enterprises except consumer credit. Tax credit products based on tax data are limited by insufficient data dimensions and too much pressure on model iteration in the economic downturn. They are highly homogeneous and of low reliability. Most of them are chicken ribs products used by banks to make appearances. In the aspect of supply chain finance, although the integration of four flows has been recognized by many parties, banks are still used to corporate credit rules for customers, most of which rely on the guarantee of core enterprises and only do big but not small. All kinds of practices show that banks lack the patience to create long-term data-based solutions for small and micro credit and penetrate the ecology of small and micro industrial chains.
As the state attaches importance to small and micro credit and the policy pressure transmitted to banks, almost all banks have all pushed the increment of small and micro credit to the sinking of real estate mortgage customers. There is no way to talk about technological progress. Basically, the bottom line of wind control has been greatly lowered, and there have been a large number of robberies of small loans, pawn and even P2P mortgage assets. Banks have lowered their requirements on customers' credit records, the first source of repayment and the purpose of borrowing. As long as the house is worth enough, everything is packaged. At present, the total amount of mortgage loans for small and micro sub-prime customers has risen sharply. A large amount of credit resources have been invested for non-operating purposes and customers with poor repayment ability. The possibility of large-scale overdue next year is extremely high. This is why the China Banking Regulatory Commission issued the Interim Measures for the Classification of Risks in Financial Assets of Commercial Banks, which requires creditor's rights overdue for more than 90 days to be classified as non-performing even if the mortgage guarantee is sufficient. When credit becomes a gambling on house prices, and when a large amount of credit funds are invested in dangerous customers who have no guarantee of operation and profitability, our new small and micro credit policy may reach a completely different result from the original intention.
There are many problems in the direction of loans.
At present, too many non-operating loans are mixed into the small and micro credit increment. First of all, the huge increase in large-sum consumption and cash-like loan business has been mixed into the statistical scope of small and micro credit. Secondly, a large amount of credit funds bypassed supervision and indirectly entered the real estate and stock markets through the cooperation of small and micro enterprise accounts and banks. Since the vast majority of bank loans to small and micro enterprises are mainly made by mortgage of real estate, the possibility that the owners of enterprises still own unsecured real estate is extremely low even though the leverage ratio of enterprises has been used to the limit for many years, so there are three obvious deviations in the direction of new incremental financing.
1. Business owners must purchase new real estate to leverage bank loans. However, it is obvious that if they purchase real estate and then go to the bank for mortgage, the cash flow will be reduced once they enter and leave, and they will also have to bear higher interest rates. Business owners who are willing to do so basically want to bet on the appreciation of real estate, rather than use it for operation. Most of these enterprises have a long history of operation and have cash flow, which is in line with the requirements of the bank. However, this kind of loan seems to be used for operation and actually points to real estate speculation.
2. Another part of the new credit comes from customers with no business background and unknown purposes. This part of customers own a considerable amount of unsecured real estate. Because it was strictly impossible to obtain financing in the past, banks have lowered their control over the use of loans in order to complete their tasks. Some banks and intermediaries even helped to package their business background, which has enabled them to obtain financing from banks. Most of these loans are directed to real estate and the stock market, which can be seen from the rapid growth of the housing market and the stock market this year.
3. Another part of customers own real estate and have business background, but most of them have poor business ability. They have not met the bank's requirements for credit investigation, cash flow and profitability. The repayment ability and willingness of such customers are poor and risky. Now banks are willing to lend only to bet that house prices will not fall, that someone will accept the offer, and that they can complete the task.
Under the circumstances that market fundamentals, profitability of small and micro enterprises have not been fully improved, and bank credit is still constrained by real estate mortgage, the result of greatly increasing the absolute value of financing for small and micro enterprises is likely to be that a large amount of credit funds bypass entities and move to speculative markets such as real estate speculation and stock speculation, while at the same time increasing leverage for some small and micro enterprise owners who lack management and profitability, and eventually creating more dishonest people.
Seven, the current relief policy has many contradictions.
1, the government and the bank's understanding is not unified. First of all, we must make it clear that increasing credit to small and micro enterprises and reducing their financing costs are considered by the state based on the social value of the survival and development of small and micro enterprises, and are not pure market behaviors in themselves. Some banking executives, including credit experts, have doubts about the small and micro credit delivery task under the high pressure of the central government. The main reason is that various measures are contrary to the modern corporate governance and market-oriented development process that commercial banks have been struggling for many years. The reason why I support the central policy with both hands is very simple. China's banking industry has never been purely market-driven. The current practice is to rectify the credit market dominated by government credit on a large scale by a strong administrative means. There is nothing wrong in the direction of increasing credit to small and micro enterprises and reducing the financing cost of small and micro enterprises. The initial start-up is strong and effective, and has the effect of curing emergencies with drastic drugs. However, measures must be taken immediately to establish a long-term and sustainable security system and to solve the above problems and prevent the occurrence of crises.
2. Macroscopically, the investment in the cost of credit assistance is insufficient and there is no transparent, effective and sustainable delivery channel.
There are two kinds of rescue methods. First, the central bank and the CIRC will provide policy support to banks. The central bank's policy is carrot, using direct economic subsidies, including directional allowance of deposit reserve, directional refinancing and rediscount. Targeted medium-term lending facilities; Direct subsidies to banks according to the amount of small and micro credit. The policy of the China Banking Regulatory Commission is a big stick. It takes window guidance, regulatory requirements and index assessment as the main methods, and rigidly requires banks to issue small and micro loans in a targeted amount, proportion and interest rate. The above objectives are achieved through the concession of internal interests of banks. Second, the central and local governments will make economic compensation. The main methods include exemption of value-added tax from interest income of small and micro enterprises in banks, establishment of small and micro credit risk compensation fund by local government, financial discount of small and micro credit, concession of guarantee fee by policy guarantee companies, and credit risk sharing of small and micro enterprises by local government.
Government departments at all levels have successively issued these related policies, but the implementation effect is not ideal. The main reasons are also two.
First, the economic compensation is not strong enough to mobilize the enthusiasm of banks. The bank is basically a benefit-oriented assessment mechanism, requiring the bank to increase its investment in small and micro credit. Compared with the business of state-owned enterprises, central enterprises, government platforms and large companies used by the bank, the bank needs to compensate for the three major costs incurred by the bank. These three major costs include: efficiency costs caused by difficulty in information symmetry and small single delivery; Increased management costs due to large labor input and difficulty in non-standard wind control; High risk costs due to low operating capacity and vulnerability to market shocks of small and micro enterprises. Regulators often help banks work out a very ideal profit margin account, such as interest rate and non-performing rate control within a few percent, but there are two factors that have not been fully considered:(1) Why and with what reason are banks willing to sacrifice higher interest rates and higher efficiency, leaving government platforms and large companies to make small and micro loans instead of doing so? Only by subtle policy concessions and regulatory pressures?(2) The bank's credit interest rate and non-performing rate data are completely distorted, thus deducing the profit balance point of small and micro loans is completely unreliable. At present, the cost of pure mortgage loans for small and micro enterprises is rarely lower than 6-8% of the annual growth rate. The average cost of factoring loans and credit loans is rarely lower than 10%-15%. Taking into account the hidden costs repeatedly prohibited by the CIRC but still widely existing in practice, such as borrowing for deposit, borrowing before transferring to bank notes, and overlapping wealth management products, the average annual growth rate of small and micro credit costs is 8-10%. In the past few years, the real NPL ratio of small and micro banks was actually not less than 10% in most banks, even more than 30% in many banks, and the extreme cases were as high as over 50%, which were not reflected in the statements. According to the historical data of Tyrone Bank, Taizhou Bank and Changshu Agricultural Commercial Bank, which have been focusing on small and micro credit for many years, the average interest rate of small and micro credit is 12-15% annualized, taking 6-8 years as a credit cycle. After eliminating extreme annual bad losses, the total ROE for many years is very little different from that of the general large banks, and faces such huge defects as long cultivation period, poor growth and difficult replication in different locations. What's more, most of these banks are located in areas with good ecology of small and micro enterprises and numerous customers, and most banks are difficult to follow.
Therefore, if banks are required to issue a large amount of small and micro credit from the heart and the interest rate level is close to the average loan interest rate of large enterprises, banks are required to sacrifice more than 5% of the interest difference, bear twice the management cost and suffer several times of non-performing loans periodically. How can banks be compensated economically?
Second, the policy transmission mechanism is not smooth and transparency is not high, leading to policy failure.
Due to the huge volume of bank business, it is difficult to strictly distinguish between large company business and small and micro credit business. Banks have a variety of means and impulses to cope with supervision and assessment. Supervision pressure and credit rescue policies are easily used or reduced by banks in the process of being transmitted to the grassroots. In addition to the demand of head office-level volume increase and price decrease that is difficult to sustain, all branches and sub-branches will also resist heavily, which is likely to generate a large number of rent-seeking opportunities and moral risks at the operational level.
If this kind of policy and strong market can be sustained, it may be a good thing to reallocate resources. However, the current sports lending has great uncertainty in terms of policy support, interest balance, initiative and promoting the effective development of the market. Under many credit behaviors that violate market laws, the ecology of small and micro credit will be forcibly reconstructed. If it is not converted into a sustained, effective and standardized policy relief system, once the tide of policy and pressure ebbs, it will even produce a chicken feather reaction. From these perspectives, China's micro and micro credit is at an extremely sensitive historical turning point, with a huge and dangerous time window just around the corner.
What should we do?
Now that the question has been raised, how to do it is the most important thing. In my opinion, we must start from the following points to comprehensively adjust our small and micro credit rescue mechanism.
First, give enough "social credit assistance costs" to small and micro enterprises at the national level.
At present, there are various rescue policies, but the overall direct economic support is insufficient. This is mainly reflected in the fact that the performance-to-price ratio of banks doing small and micro businesses is still not the same as that of big companies. In addition, the policy also requires banks to cut interest rates for small and micro businesses, which makes the performance-to-price ratio of small and micro loans lower. Banks have only policy pressure and no motivation to operate. According to the historical performance of the credit market, it is probably necessary to increase the net interest margin subsidy by more than 5 percentage points to banks engaged in small and micro credit, so as to promote enough banks to engage in small and micro credit business seriously and form an effective and sufficient supply. This is only based on experience and perception. Relevant departments can make scientific evaluation according to the historical operating data of banks to obtain accurate and scientific net income difference between large company business and small and micro credit business for decision-making by central policy-making departments and financial departments.
At present, all the economic policies put together give the bank benefits and make up for the loss of the bank's income difference by only 1 percentage point, while the rigid requirement for the bank to give interest rate concessions to small and micro enterprises has reduced the bank's policy income by more than half. What needs to be explained here is that it is an objective fact that small banks are forced to engage in small and micro credit businesses with higher interest rates to obtain living space due to their inherent lack of competitiveness in the business of large companies. However, these small banks will still choose to give priority to large businesses, supplemented by small and micro businesses, as long as they have the opportunity to do government platform and large company business. Therefore, if a 3-4 percentage point spread is subsidized for small and micro credit businesses of small banks, their initiative to give up government platforms and businesses of large companies that are not competitive and their initiative to stick to small and micro businesses for a long time will continue to be strengthened, which is better than forcing large banks to invest in small and micro businesses.
By the end of 2018, China's banking sector had a loan balance of 140.6 trillion yuan, of which Pratt & Whitney's small and micro loan balance was 8 trillion yuan. That is to say, even if a 5% profit margin subsidy is given to all small and micro loans, the entire national finance will pay a price of 400 billion yuan. Of which, 200 billion yuan of tax can be directly delivered to financing enterprises by deducting value-added tax and income tax from interest expenses of small and micro enterprises to reduce path losses. Similarly, banks can also adopt a similar approach and directly offer preferential treatment to interest income from small and micro credit. Of course, the banking industry has enjoyed huge profits depending on the state's credit and monopoly operations, and it is indeed obliged to share some of the profits to fulfill its obligation of assisting small and micro businesses. A piece of bank profits can be divided into special funds to directly finance small and micro enterprises through central bank, finance, taxation and other means for targeted subsidies, which is better than forcing banks to increase investment and reduce interest rates. The above relief costs can be given through different channels and in different ways. I will only give a few examples.
Second, to reduce the excessive demand for credit funds by the government and state-owned enterprises. The market supply is balanced. When the government platform and state-owned enterprises' share of credit resources decreases, it is obviously impossible for banks to empty the deposits they have absorbed. A large amount of credit funds will naturally go to entities and small and micro enterprises. The Ministry of Finance announced that as of November 2017, the total liabilities of China's state-owned enterprises had reached 100.08 trillion yuan, of which bank loans accounted for the absolute majority. However, according to statistics from the China Insurance Regulatory Commission, by the end of 2018, the total amount of inclusive small and micro loans nationwide was only 9.36 trillion yuan. At present, the average financing cost of state-owned enterprises is generally 5%-10% lower than the benchmark interest rate of loans, while that of private enterprises is generally 30%-100% higher than the benchmark interest rate. As a result, the average cost difference between private enterprises and state-owned enterprises is about 5% annual, which has exceeded the profit margin of most industries. In terms of the availability of loans, the threshold for state-owned assets is extremely low, while private enterprises rely on real estate mortgage for financing and other available credit products account for a small proportion. This gave birth to a deformed market. State-owned foreign trade companies do not operate in the market, but only issue letters of credit and guarantees for private enterprises, or directly purchase for private enterprises and provide import and export channels for them, earning only the capital spread and becoming quasi-financial companies. State-owned real estate companies and engineering companies have become subcontracting companies and have become project dealers in the market with deep pockets. Many large-scale government bidding projects have directly turned private enterprises into minions who receive second-hand subcontracting from state-owned assets. Private capital in many industries either withdrew from the market or was exploited by state-owned assets. The state-owned assets have only become porters of funds. Many enterprises have no market or business team at all and rely on the financial department to make money. The quasi-financial sector set up by a large number of state-owned and central enterprises has become the most profitable and even the only profitable sector in their enterprise groups. All these have virtually increased the pressure on small and micro enterprises to raise funds, which is difficult and expensive.
Three, under the state-owned framework, set up a special small and micro credit bank. Since the state-owned big banks enjoy too many policy and monopoly bonuses, it is obviously fair to require their rigidity. State-owned big banks can be required to set up independent small and micro credit banks, with their parent banks providing low-interest funds according to a fixed proportion and scale, oriented by social benefits, operating independently and subject to independent supervision. Or instruct state-owned big banks to give low-interest quota funds to be distributed to small and micro credit specialized banks through the central bank. Through this way to protect the source of funds for the cost of credit assistance, reduce direct financial pressure and seek a balanced redistribution of financial resources. We can try to set up a special policy-oriented small and micro credit bank to solve the contradiction between the profit-seeking capital of commercial banks and the emphasis on social performance in the small and micro credit business, so that it can truly assume the important task of policy-oriented assistance to small and micro enterprises, establish a set of scientific, sustainable and effective small and micro credit strategies, tactics and technologies, serve small and micro enterprises well, and avoid conflicts between the rescue mechanism and commercial financial capital.
Four, to urban commercial banks, rural commercial banks, rural credit cooperatives with clear policy guidance and precise policy support. For city commercial banks, as they are located in the urban areas where large and medium-sized banks are concentrated, they do not have much competitive power when facing the financing from government platforms, state-owned enterprises and large company customers. Therefore, as long as sufficient policy relief is given, they will naturally focus on the small and micro credit field. For rural commercial banks and rural credit cooperatives with strong localization characteristics, the central government should accurately measure the effective credit demand of rural finance and limit the outflow of funds from rural financial institutions in proportion and according to plans. This is considered against the background of the serious uneven distribution of financial resources in China and the serious withdrawal of rural local funds to cities. Objectively speaking, the demand for effective credit in rural areas is insufficient, the credit delivery efficiency is not high, and the risks are high. Therefore, financial institutions generally have the demand to move from rural areas to cities, which is completely reasonable in business. However, in the current situation of insufficient access to China's financial market and the extreme shortage of small and micro-sized banks operating in the market, bank executives under the leadership of the government frequently adjust, and it is difficult to have enough patience to cultivate the small and micro credit market. This will inevitably lead to a high concentration of low-cost savings deposits to government credit and cities, aggravating the gap between the rich and the poor in the region and causing greater social injustice. If the government does not use some rigid administrative orders to interfere with the allocation of resources, it will be more difficult for the government to arrange the cost of credit assistance, and even the finance cannot afford these assistance costs. Therefore, a more realistic approach should be to strictly limit the urbanization process of rural commercial banks and rural credit cooperatives, so that rural commercial banks and rural credit cooperatives can assume the role of the main channel of rural finance and small and micro finance, so that they can establish a long-term strategy of taking root in the local economy and striving to create small and micro ecology. At the same time, we should try our best to make rural credit cooperatives return to the nature of credit cooperation, instead of transforming them into rural commercial banks, and thoroughly turn them into credit mutual aid in the direction of standardizing mutual aid and management. China does not lack commercial banks. China needs to allocate financial resources at multiple levels. Rural credit cooperation and mutual aid system is a very good and diversified financial supplement to rural finance, especially to the bottom three rural areas. The regulatory authorities considered transforming it into a rural commercial bank from the perspective of compliance management and long-term corporate governance. However, this transformation directly knocked out the lowest level of national finance. It was a mistake of independent tactics and strategic failure in the macro layout of rural finance, just as the Agricultural Bank withdrew from villages and towns and concentrated in cities. How to find a scientific method to perfect the rural cooperative financial system, improve its operation quality and reduce operation risks is indeed a huge challenge. After many years of reform and adjustment of the rural financial system, the government suddenly found that China's policy-based assistance to serve the county economy and agriculture, rural areas and farmers has not been implemented as the main body. Even those banks that are forced to stay in the local areas by regulatory constraints have set profit as their sole objective of operation, and the interest rate on small and micro enterprises outside the system and agriculture, rural areas and farmers has even reached a point of near plunder. This has become a purely commercial credit institution that grabs county deposits at low interest rates and obtains monopoly profits at high interest rates, further aggravating the unfair distribution of resources inside and outside the system and increasing the contradiction of unbalanced fund supply.
Therefore, the key to solve the problem of county financial supply lies in the functional orientation of county financial institutions first. Is it mainly commercial or policy-oriented? Who is responsible for commercial services and who is responsible for policy assistance? All of these must be very clear. Those who want rural commercial banks and other institutions to operate in a commercial and market-oriented way and also want them to rescue the local economy in the designated areas must not have the mentality, because these are two completely opposite demands. In the almost completely monopolized rural financial market, rural commercial banks and rural credit cooperatives will, of course, first use high interest rates to ensure their own commercial interests. It is impossible to actively serve the rural economic entities that have no bargaining power with low interest rates. In fact, this problem also exists in the urban areas above the county level and the huge customer base of small and micro enterprises.
Five, directly through tax return, interest subsidies to help small and micro enterprises to reduce financing costs. Regulators force banks to reduce the financing costs of small and micro enterprises, but the regulation is easily confused by opaque statistics. The so-called loan interest rate drops and may even become a statistical game. There are various ways for banks to collect interest on loans from small and micro enterprises in disguised form, such as loan rollover, loan-to-deposit linkage, interest transfer to intermediate business income, etc. Although the Bank Insurance Regulatory Commission has been making repeated orders for more than five years, the effect has been unsatisfactory for this reason. Therefore, instead of expecting banks to reduce the financing costs of small and micro enterprises, it is better to directly allocate targeted funds from bank profits, allocate fixed taxes, and directly correspond to small and micro enterprises through financial and tax means. From another perspective, reducing the financing cost of small and micro enterprises through banks is not as effective as fully reducing the tax pressure on small and micro enterprises, which can reduce the path loss. This means that financial instruments are not as good as financial instruments. However, financial instruments have moved a lot, and the investment of small and micro enterprises is very large. However, the tax revenue in the first quarter of the country is still rising year on year, while the operating profits of enterprises above designated size have dropped considerably. It is clear whether large enterprises have paid more tax or more small and micro tax payers have been added.
Six, the establishment of a fair and orderly, multi-level supply system of small and micro credit. Large banks serve large enterprises, small banks serve small enterprises, and quasi-bank credit institutions serve vulnerable enterprises that cannot be covered by banks. This is determined by their scale, capital cost and operating characteristics. However, since the banking industry in our country is almost all state-owned, even urban commercial banks, rural commercial banks and even rural credit cooperatives, regardless of the ownership structure, their management rights are in the hands of governments at all levels and appointed officials, resulting in large and small banks being accustomed to giving priority to serving government platforms, state-owned enterprises and large enterprises. Even agricultural commercial banks and rural credit cooperatives will give priority to meeting the local credit demand within the system. Funds idle prefer to be transferred to cities through bills and peers, rather than increasing investment in small and micro businesses and agriculture, rural areas and farmers, because the former has the lowest risks and higher benefits.
The proportion of private banks that know most about private and small and micro enterprises is too low, and they are subject to strict regulatory restrictions. The market size is almost negligible. Such bank credit institutions as licensed small loan companies are also extremely small in size, both of which are extremely short of low-cost sources of funds. All low-cost deposit funds are controlled by banks in the system. Private financial and quasi-financial institutions cannot obtain effective financial resources to support their small and micro credit operations with scale, low interest rate and safety, and are often forced to wander in the sub-prime and high-risk markets. The best low-cost funds from the public must be supported by financing guarantee, performance insurance and a high proportion of post-poor deposit before they can enter the small and micro credit market outside the system. The difficulty and cost are inevitable.
The marketization of interest rate in China has actually only realized the marketization of loan interest rate to private enterprises. Strict restrictions on the control of deposit control over the interest rate ceiling have ensured that banks in the system have long-term and low-cost public deposits. Credit demand within the system is guaranteed by preferential interest rate due to endorsement of government credit, while credit institutions outside the system and private enterprises cannot share the policy dividend. Take private banks as an example. Even if they have bank licenses, they are discriminated against by other banks in the system. The cost of the same bank is too high. The lack of government credit endorsement and the upper limit of the interest rate limit hinder their access to public deposits through interest rate competition. They are forced to wholesale funds at high interest rates to banks in the system, thus falling into the difficult situation of high interest rates, high risks, low interest rates and no profits.
Unbalanced allocation of bank resources is an extremely important reason why small and micro enterprises find it difficult and expensive to raise funds. Banks within the system have a large amount of low-cost funds, but they are unwilling to invest outside the system. Banks outside the system and licensed small loan companies have the motivation and understanding to invest in small and micro enterprises, but the lack of large-scale and low-cost funding sources, coupled with strict market access restrictions, high and unequal regulatory costs, make it difficult for banks outside the system and quasi-bank credit institutions to survive in the market, let alone develop. This has forced private financial investors to lament that holding a license is equivalent to golden handcuffs and not holding a license while waiting for iron handcuffs.
Repressing banks in the system to invest in small and micro enterprises outside the system is obviously better than establishing a larger-scale and more-level credit supply system. The supervision department lacks supervision experience and effective means for non-institutional banks, and worries about credit risks and supervision risks. Therefore, it is understandable to carefully test the mentality of private banks and private small loan companies. However, after many years of trial, the scale of non-institutional credit institutions is still a drop in the ocean or even difficult to survive. This is too conservative. This is totally incompatible with the important role played by private economy and small and micro enterprises in the whole national economy, and this is also the biggest defect of the current credit supply system. We should fully understand that there are huge differences in credit rules, managers' mentality and risk control culture inside and outside the system. It is difficult to require managers of state-owned banks to take professional risks and credit risks to invest in small and micro enterprises outside the system. We must objectively recognize the system gap here. Only by establishing a perfect and balanced private financial supply system, reasonably sharing low-cost public deposits and fully caring for small and micro credit institutions can it be possible to establish two parallel, equal, sustainable and less conflicting credit supply mechanisms within and outside the system. Only in this way can the basic state policy of "unswervingly consolidating and developing the public economy and unswervingly encouraging, supporting and guiding the development of the non-public economy" be realized.
Seven, at the national level to establish a unified small and micro credit relief mechanism. At present, there are many rescue measures for small and micro credit. The central and local governments have either scratched the surface or wasted blindly. Therefore, a unified and orderly rescue mechanism must be established at the national level. According to the financial and economic development, a complete rescue plan must be scientifically and accurately formulated, the delivery channels and means must be clearly defined, an effective statistics and evaluation system and a strict supervision and correction mechanism must be established, so as to finally ensure the long-term, scientific and sustainable support policies for small and micro credit. The central and local governments should coordinate and manage the financial affairs, and stick to various rescue policies to prevent power rent-seeking and waste of resources.
Eight, strictly distinguish between policy institutions, policy relief behavior and commercial institutions, market-oriented small and micro credit means, policy relief means cannot destroy the bank's commercialization process and small and micro credit risk pricing rules. Although China's banking industry is still dominated by the state and the government, the market-oriented characteristics of the main operation have been clearly defined, and a series of systems such as corporate governance, performance appraisal and risk pricing have been initially established or are becoming more and more mature. If it is used as the main channel to fulfill the rescue of small and micro enterprises and bear and distribute the rescue costs of small and micro credit, directly forcing banks to change the basic rules of the credit market by administrative means, it will completely disturb the bank's wind control structure and management principles, thus reversing many years of efforts to modernize and commercialize the banking industry and returning to the state of the planned economy era.
Nine, set up a special policy of small and micro credit banks, vigorously develop private banks, small and micro credit commercial banks and small and micro credit institutions of similar banks, reduce the excessive supervision costs imposed on these institutions due to insufficient supervision confidence, and strictly abide by the principle of market fairness of credit institutions inside and outside the system. Sufficient policy support should be given to the small and micro credit delivery of these institutions; When necessary, special small and micro credit relief funds should be transferred from large and medium-sized banks to provide targeted low-interest loans to the above-mentioned various institutions so that credit institutions that are good at small and micro businesses, understand small and micro businesses and focus on small and micro businesses can obtain more resources to serve small and micro businesses. This is better than forcing large and medium-sized banks that are not good at small and micro credit to engage in small and micro credit and cruelly lowering loan interest rates. In fact, it is far more effective to accurately support small and micro enterprises through financial means than through credit means. Instead of allowing banks to bear the relief cost of small and micro credit by violating market laws, it is better to directly levy higher taxes on banks to give targeted subsidies to small and micro enterprises. As for government revenue and expenditure, the two are the same, just the left hand and the right hand. Considering the monopoly of resources in China's banking industry and the risk-free arbitrage of government credit, it is completely reasonable to take out some rescue costs from banks, especially large banks. Taking large banks as the main channel or even the only channel for small and micro credit will enable small banks, private banks and licensed small loan companies to operate in a weak or even disappear directly under the unequal policy environment and resource environment, which is a huge destruction to the ecology of small and micro credit in China.
Relevant government departments are superstitious about the resource advantages and cost advantages of large institutions. They even regard small and micro credit institutions as unnecessary fund dealers between large banks and small and micro enterprises. They ignore their natural understanding of small and micro enterprises, their professionalism and patience in the last kilometer. They completely fail to understand the huge investment of small and micro credit institutions in customer acquisition, information symmetry, investment efficiency and management cost. They cannot accept the difference between the rationality and availability of pricing high interest rates for high-risk small and micro customers. This is a huge misunderstanding. The multi-level allocation of small and micro credit institutions and the multi-level interest rate level of small and micro credit should be the reasonable existence of the market. Government departments should know that the root cause of the difficulty in financing small and micro enterprises is not the excessive pursuit of profits by credit institutions, but the siphoning effect on the small and micro credit market caused by the excessive demand for government credit, the imbalance of financial supervision on the allocation of financial resources, and the unsound government credit rescue mechanism for small and micro enterprises.
We should also make it clear that the difficulty in financing small and micro enterprises is not an incentive for small and micro enterprises to survive. Bank loans are a commodity and a liability for which enterprises have to pay a price. The high human cost and tax cost of small and micro enterprises are the main reasons why enterprises are difficult to make profits and maintain. Interest-bearing loans can only play a very limited role in rescuing enterprises that continue to suffer losses. Unless credit is turned into a low-cost or even non-repayable government relief, the role of excessively boosting credit to small and micro enterprises will be greatly increased. Mentioning the difficulties of small and micro enterprises is that financing is difficult and expensive, thus excessively increasing leverage to small and micro enterprises can only lead to a large number of dishonest people and cause both banks and enterprises to suffer.
Only by revising the top-level financial design, adjusting the credit policy for small and micro enterprises, and providing "social credit assistance costs" by the state, can the so-called problems of difficult and expensive financing for small and micro enterprises be fundamentally alleviated. Only by reducing interest rates (or subsidies), tax cuts, social security and rent-seeking costs, allowing more small and micro enterprises to survive, and giving full play to their power to create jobs and protect vulnerable groups, can China's economy have hope of regeneration. The large-scale relief campaign for small and micro credit in China has reached a sensitive transition period. There is not much time left for top-level policy design. Should we make a thorough reform to form a long-term effective relief mechanism for small and micro credit, or wait until the tide recedes and return to the past as before, I believe our government will make wise arrangements.
God bless small and micro enterprises and people's livelihood. God bless the small and micro, the hope of the country.
