Access to Finance for High-Tech SMEs: Regional Differences in China

Differences exist in the pace of regional development in China between the richer Eastern coastal and poorer Western regions. These differences may result from the relative success of national and regional policy initiatives or more simply the ability of businesses to access finance. High-tech businesses are being encouraged by China's government as a means of rebalancing regional development from the existing physical resource-intensive industries. In this paper we examine the experiences of high-tech small and medium-sized enterprises (SMEs) in relation to securing finance, evaluating the experiences at the three stages in their development. The empirical evidence, based on seventy-four face-to-face interviews with owners and senior managers of high-tech SMEs and on nine with bank and government officials, facilitates a comparison of the two study regions, Guangdong and Guangxi provinces. The findings indicate significant differences in the availability and nature of financial sources between the two regions. Firms in the more-developed Eastern region experience access to a wider range of funds from both formal and informal sources than their counterparts in the less-developed Western region. Although this was evident at all three stages of the business development cycle, it was more significant during the earlier stages of development. The consequences of such a disparity in financial sources may lead to further exacerbation of the regional differences and hence prove counterproductive in seeking to develop a more balanced strategy of economic development. We conclude by discussing the prospects for improving this present situation through policy initiatives.