Business / Markets

Defenders of online finance point to its advantages

By Yao Jing (China Daily) Updated: 2014-03-05 09:03

Although China's nascent online finance industry has some very vocal critics, others see the sector as an agent of change that will bring higher interest rates for depositors and additional financing for struggling small and medium-sized enterprises.

Defenders of online finance point to its advantages
Defenders of online finance point to its advantages
"China's SMEs face multiple challenges. They must pay high borrowing costs and rising material costs, and some manufacturing is flowing back to the United States," said Guo Guangchang, founder and chairman of Fosun International Ltd.

The SME sector generates more than 60 percent of China's gross domestic product and about 80 percent of urban employment.

But most SMEs in China use obsolete technology and equipment. These companies are hindered by poor performance, low efficiency, and high energy and water consumption, relative to large, often State-owned enterprises, according to a report by the World Bank Group.

"Once the deposit interest rate is market-oriented, competitive SMEs will benefit from lower interest rates" as more money flows into the financial system instead of being parked in property, for example, Guo said.

"As those companies prosper, underperformers will be driven out of their respective markets and industries, which is in line with the country's economic restructuring," said Guo, during a group discussion of the second session of the 12th National Committee of the Chinese People's Political Consultative Conference.

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