IFC China Advisory Services Results 2000 — 2010
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IFC Advisory Services in China IFC China Advisory Services Results 2000 — 2010 In Partnership with: Focus: Three Key Areas IFC’s Advisory Services work in China has focused its work on three key areas: 1. Opening up of new markets and opportunities for small and midsize businesses 2. Supporting development in the poorer western and central regions of China 3. Helping to combat climate change by directing financing to renewable energy and energy efficiency projects Challenges IFC Action Result Highlights - Focus on SMEs - SMEs lack access to - Facilitated more than $450 billion in finance and biz - Building managem- capital for SMEs development ent skills and comp- opportunities etitiveness - Business promotion - Underdeveloped - Enabling access to reforms helped private sector in finance triple investments China’s central/ in central city of - Investment climate western regions Yinchuan reforms - 57 mln tons of CO2 - China global leader - Climate change mi- avoided annually in CO2 emissions tigation Contents Executive Summary.............................................................................................................................. 04 Creating Opportunities for Small and Midsized Enterprises............................................................. 09 The Challenge............................................................................................................................. 09 IFC’s Response............................................................................................................................. 09 Result Highlights........................................................................................................................ 09 Putting the SME Regulatory Framework in Place: Policies and Legal Structures .................. 10 Corporate Governance: Training, Knowledge Management, Awareness Raising................. 11 Oiling the Engines of SME Growth: Reforming Local Banks and Financial Institutions........ 12 Supporting Development in Central & Western Regions................................................................... 15 The Challenge................................................................................................................................. 15 IFC’s Response................................................................................................................................. 15 Result Highlights........................................................................................................................ 16 Linking-Up: Connecting Small Suppliers to Large Producers................................................... 16 Raising Skills and Standards: Training Small and Midsized Enterprises.................................. 17 Shifting Inland: Investment Promotion.................................................................................... 18 Special Initiative: Emergency Response.................................................................................... 20 Fighting Climate Change........................................................................................................................ 22 The Challenge............................................................................................................................. 22 IFC’s Response................................................................................................................................ 22 Results............................................................................................................................................. 22 Changing Financing, Changing Policy......................................................................................... 23 Looking Ahead ........................................................................................................................................ 24 Climate change............................................................................................................................... 24 Balanced urban and rural development................................................................................... 24 Global China................................................................................................................................ 24 IFC-China – 30 Years of Cooperation................................................................................................... 25 Executive Summary China’s economy has been powering ahead at an impressive speed. Production, trade and knowledge transfer have helped to lift millions of out of poverty while racking up growth rates of around 10 percent over the last decade. China has also weathered the recent global economic crisis better than many other countries. And yet, China still experiences development challenges. Much of the country’s progress has been concentrated in the coastal regions, private small and midsized companies face limited financing and development options, and achieving less carbon-intensive economic growth remains a challenge. IFC has responded to those challenges with concrete actions and measurable results throughout the last decade. In 2002, we opened our office in Chengdu – some 1,500 kilometers inland from Beijing – a year after establishing IFC’s China Advisory Services. The program, run out of Sichuan’s capital, has helped jumpstart investments in some of China’s poorest central and western regions, opening up new markets and business opportunities for small enterprises, and supported China’s fight against climate change through innovative financial guarantees and advice. Midway through the last decade, IFC affirmed its work on improving businesses’ access to finance as the program’s cornerstone and increased support for financial infrastructure development. Support for individual firms began focusing on supply-chain linkages to raise product quality and help smaller firms provide services and raw materials to larger producers. At the same time, investment climate regulatory work expanded its scope from the Sichuan province and local-sector issues to focus on a national-level priority: helping to increase investment flows to central and western provinces. A national corporate governance program was also initiated. Creating Opportunities for Small and Midsized Enterprises The Challenge At the end of 2006, small businesses contributed 60 percent of China’s GDP, but accounted for only 15 percent of outstanding credit. An IFC survey found that 78 percent of small companies cited lack of access to finance as a major constraint for business development. Small entrepreneurs are also held back by onerous exceptionally high and the training content has been widely business regulations and red tape, making it difficult to attract used investments, grow, and create jobs. tAs of June 2010, IFC is working with five banks that lend to small and midsized entrepreneurs (mostly operating in western IFC’s Response and frontier regions) helping to boost lending by 16,000 loans, IFC has helped Chinese micro, small and midsize enterprises to a total of 40,000 outstanding loans valued at more than $9 obtain financing by improving the policy framework and billion. SME-banking projects that are now closed helped financial infrastructure and strengthening the capacity of local facilitate an additional 40,000 loans outstanding. financial institutions to undertake sustainable lending. Insufficient access to finance has been a significant constraint Supporting Development in Central & for the emergence and growth of micro, small, and rural Western Regions enterprises in China. Changing this will be key to lifting millions more out of poverty. The Challenge Result Highlights 3FHJPOBMEJTQBSJUZJOFDPOPNJDHSPXUIBOEXFBMUIJTPOFPG the biggest challenges facing China. The massive Sichuan tIFC helped to encourage new ways to access of finance and earthquake in May 2008 compounded the plight of poorer financial institutions suited to smaller firms, such as leasing, regions in inner China, killing tens of thousands and bringing credit guarantees for small and midsized enterprises, and the private sector to its knees. While small and midsized microfinance enterprises are the heart of the economy in China’s central and t*'$IFMQFEUPFTUBCMJTIBO"DDPVOU3FDFJWBCMF3FHJTUSZUIBU western regions, without adequate investments, management facilitated more than 160,000 loans to date. IFC’s work has skills, and quality controls they are often unable to secure large unlocked more than $450 billion in capital for small and contracts to ensure the sustainability of their business and the medium size enterprises ability to create long-term jobs for millions of poor people. tThrough IFC’s assistance, a comprehensive national credit bureau is now operational and provides the world’s single IFC’s Response largest repository of individual credit/financial data. It As the only international agency with an established office in facilitated more than $670 billion worth of financing for Sichuan province at the time of the earthquake, IFC increased about 200 million borrowers. the lending capacity of local financial institutions through a tThe Business Edge Management Training Program trained combination of investments, grants, and advice, helping to 126 local trainers who provided 79 courses to about 5,500 open up business opportunities. IFC’s linkages program works managers of small and midsized enterprises in Sichuan and to improve production processes at small and midsized other Chinese cities. Participant’s satisfaction