Small and Medium-sized Enterprises Dominate China’s Commercial Paper Market

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Commercial paper is emerging as an increasing important financing tool for small and medium-sized enterprises (SME’s) in China’s private sector.

A report from the People’s Bank of China (PBOC) indicates that commercial paper issued by SME’s accounts for around two thirds of market share, while a significant percentage of the commercial paper issued by the large-scale enterprises is bought by SME’s that serve as their suppliers.

Official data further indicates that the commercial paper acceptance amount for the period from January to November this year was 16.12 trillion yuan, for an increase of 3.19 trillion yuan, or 24.71% compared to the same period last year.

The discounting amount was 8.72 trillion yuan, for an increase of 2.29 trillion yuan, or 35.62%, compared to the same period last year, while small and micro-enterprise and private enterprise commercial paper accounted for a more than 80% share.

During the first three quarters of 2018 the electronic draft payment volume was 56.5011 million for a sum of 39.74 trillion yuan, for YoY growth of 254.95% and 66.08% respectively.

“Consequently, supporting the commercial paper market is to a significant extent targeted support for micro, small and medium-sized enterprises,” said the report.

“In actuality, in order to further employ the advantages of commercial paper when it comes to supporting financing for small and micro-enterprises and private enterprise, over the past two years, the People’s Bank of China, commercial paper exchanges and financial institutions in general have worked and strategised together to jointly drive the commercial paper market to better service the real economy.”

In 2017 the Shanghai Commercial Paper Exchange (上海票据交易所)  established a rediscounting operations system in order to improve handling efficiency and “more accurately irrigate the real economy.”

Since 2018 PBOC has also added 150 billion yuan in rediscounting quotas, to be directed specifically at financing for small and micro-enterprises and private enterprises.

 

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