Challenges for China's banks: Investment policies to support technology-based start-ups

Investment policies to support SMEs and technology-based start-ups have received a great deal of policy attention today. This paper is concerned with the bank financing policies to support SME development in China. The Chinese government has introduced many policy initiatives (government intervention policies) after the country joined the World Trade Organization (WTO) to support entrepreneurial activities. The empirical study has shown that despite the introduction of the 12th Five-Year National Economic and Social Development Plan to support SMEs development, China still needs to improve regulatory policies in support of innovative businesses which would help its transition to an innovation-driven economy. The study provides lessons and policy guidelines to improve the competitiveness of SMEs in China. The insights from this study can also be applied to other developing and emerging economies attempting to understand the role of financing mechanisms in building an innovative economy.