Government and Business Environment Case Study

Case Title:

China’s Credit Tightening: Impact on Small & Medium Enterprises

Abstract:
China maintained a remarkable average annual GDP (gross domestic product) growth rate of more than 9% for more than a decade. By late 2003, its economy started showing signs of overheating. In order to prevent a bubble burst of the economy and to ensure a soft landing, the Chinese government took various steps to curb the unsustainable growth rates. Many direct and indirect actions initiated by the government forced the local banks to hold back loans for new projects. This directive of the government hit the privately-owned small and medium enterprises (SMEs) the hardest, leaving them with very little avenues to raise funds.

Pedagogical Objectives:

• To discuss the state of SMEs during the credit squeeze phase
• To discuss the alternative measures that these enterprises were planning in order to raise funds.

Keywords : China's credit tightening, Small and medium enterprises, Overheating Chinese economy,Government and Business Environment Case Study, Gross domestic product, World Trade Organisation, Credit squeeze, Excess liquidity, State-owned enterprises, China Council for Promotion of Private Economy, China Banking and Regulatory Commission, Interest rate flexibility, Over investment, fixed asset investments,Business Environment Case Study, Non-performing assets, loans, Real asset prices, Unemployment