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Financial Support for Innovative Small and Medium-Sized Enterprises: German Experience and Enlightenments (No.304, 2021)

Dec 16,2021

By Sun Fei, Research Team on “Financial Support for Technological Innovation”, Research Institute of Finance, DRC

Research Report, No.304, 2021 (Total 6369) 2021-10-20

Abstract: The German government has attached great importance to giving financial support for the R&D activities of its small and medium-sized enterprises. With banking sector as the mainstay, German financial system in 2019 witnessed a ratio of 202% between the total assets of its banking sector and GDP, whereas the ratio between the market value of its banking sector and GDP only registered at 54.6%. In this context, a banking sector supportive system, led by the performance of development banks plus the main role played by commercial banks and risk guarantee shored up by guaranty banks, has been formed in Germany. Based on the similarities China shares with Germany in terms of their financial structures, this paper notes that German experience is applicable for China and raises the following policy options. One, we need to establish and flesh out the developmental financial supportive system and enhance the credit loan efficiency by strengthening the cooperation between open-oriented finance and commercial banks; two, the commercial banks need to be encouraged to conduct differentiated product innovation in line with the local industrial structure and enterprises’ characteristics; three, the existing underwriting companies need to be vitalized by promoting the construction of financing guarantee system and raising the sharing proportion of fiscal capital to guaranty risk; four, the operation model of government investment fund with the participation of social capitals needs to be refined by a rational setting of fund duration and return-investment ratio to form collective financial support to back up innovative small and medium-sized enterprises.

Keywords: innovative small- and medium-sized enterprises, financial support, Germany experience