- Credit access is a structural, not a volume, issue
- Credit tiering and collateral bias raise hidden barriers
- Fixes lie in data, tenor and risk sharing
One: Plenty of Money, Still No Loan
Liquidity has not been scarce in recent years. Reserve requirement cuts, structural monetary policy tools and targeted support for small and micro businesses have all been deployed, and bank lending to smaller firms has kept growing. Yet many private entrepreneurs report the same experience: others seem to have ample credit, while their own facility falls short on size, pricing or tenor.
What they are feeling is a structural mismatch, not a shortage of funds. Money is available, but its risk appetite, pricing method and preferred asset forms do not line up with how private firms actually operate. Banks want verifiable cash flow, disposable collateral and a predictable repayment source. What most small and mid-sized private companies really own is orders, technology, teams and reputation—assets that are hard to standardize and hard to show on a balance sheet. The paradox follows: the firms that most need external financing are the least able to satisfy conventional credit criteria.
Two: Three Structural Blockages
The first is credit tiering. In day-to-day lending, ownership labels still influence risk pricing in subtle ways. At comparable scale and with comparable financials, a private firm often faces a higher collateral requirement, a shorter tenor or a demand for stronger guarantees. This gap is not always written into the rules, but it lives in the loan officer’s fear of being held personally responsible—because the standard for judging whether due diligence was performed is not symmetric.
The second is collateral dependence. Much credit logic still anchors on real estate. For private manufacturers and tech-oriented SMEs, plants are often leased, equipment depreciates quickly and is hard to dispose of, and intellectual property valuation and trading markets remain immature. The result is a low share of unsecured lending, with firms forced to pledge personal property or shareholder guarantees to obtain a facility—converting business risk into family risk.
The third is maturity mismatch. Firms need medium- and long-term funds matched to production and R&D cycles, but often receive one-year working capital loans that must be repaid before renewal. The uncertainty of renewal pushes companies to hold large cash buffers, reducing efficiency. When the external environment tightens, the chain reaction of pulled or halted credit is amplified.
The Private Economy Promotion Law, effective May 20, 2025, sets out rules on fair market participation, equal access to production factors and equal legal protection, providing a higher-level legal basis for addressing these blockages. But turning statute into lending behavior requires mechanisms, not just principles.
Three: From Slogans to Mechanisms
First, make “willingness to lend” calculable. Clarify the standards for due-diligence exemption so frontline staff have clear boundaries rather than vague assurances. At the same time, adjust internal bank assessments to give differentiated weight to private and small-business lending, reducing the rational choice of doing nothing for fear of making a mistake.
Second, let data replace collateral. Tax, social security, utility, customs and supply-chain order data already sit on multiple platforms. The key is to connect them into credit profiles that lending models will actually accept. For tech firms, building markets for IP valuation, registration and disposal is essential so that asset-light businesses can be priced fairly.
Third, improve the tenor structure. Alongside revolving credit and renewal without principal repayment, China needs genuine medium- and long-term products whose duration matches business cycles. Bond and equity markets must also become more inclusive of private issuers so that all pressure does not fall on bank credit alone.
Fourth, make risk sharing real. Government financing guarantees, risk compensation funds and insurance enhancement mechanisms are not about bailing out firms; they are about spreading risks that no single institution can bear, thereby lowering the overall risk premium.
Conclusion
Difficulty in obtaining financing cannot be explained away as banks simply favoring the rich. It is the joint product of incentives, information and maturity structures. The law has established the principle of equal treatment; the work ahead is mechanical—making due-diligence exemption operable, data priceable, tenors matchable and risks shareable. For private firms, institutional improvement and corporate self-discipline must advance together: clean up the books, accumulate credit records, and turn orders and technology into identifiable assets, so they can gain more control as the financing environment evolves.