Guangdong Development Bank has been authorized to sell up to 20 million yuan worth of short-term financing bonds for small- and medium-sized enterprises (SMEs), the mainland's first batch of its kind to particularly aid SMEs, a source with the lender said on Oct. 10.

The bonds, issued by Jiangsu Dongguang Micro-electronic Co, were recently approved by the National Association of Financial Market Institutional Investors, the inter-bank bond market governing body.

The mainland allowed non-financial companies to offer short-term bonds to qualified institutional investors on the inter-bank market in May 2005, and they haven't needed the central bank's approval when issuing such bonds since April 15 of this year.

As of last year, 316 companies issued 769.3 billion yuan worth of short-term bonds, with 320.3 billion yuan in outstanding debt, official statistics showed.

"We are greatly honored to sell the first batch of short-term bonds for SMEs on the mainland, as it will help diversify the financing channels for such companies," said Michael Zink, the bank's president.

After a special financial scheme of EasyLoan, which was launched last year, selling of the short-term bonds is seen as another important measure for the bank to aid SMEs, according to Zink.

"The bank has always attached great importance to financing SMEs, which account nearly 90 percent of our clients," Zink said.

The bank provides EasyLoan services at its outlets in major manufacturing cities such as Dongguan and Shenyang.

SMEs, especially the processing trade companies in the Pearl River Delta (PRD) region, have been hard hit since the beginning of this year, affected by shrinking global market demand and increasing prices for production materials.

"A lack of funds is the biggest problem facing SMEs and processing companies," Zink said, citing a recent survey that indicates 74 percent of the 1,500 companies interviewed were in need of funds.

The survey was conducted by the economic and trade authority in Dongguan, one of the most important manufacturing powers in the PRD region.

Beside efforts from the bank, the government in Dongguan had also approved a 1-billion-yuan fund earlier this week to ease the financial difficulties of SMEs and processing companies.

Feng Shengping, a researcher with the Guangdong provincial situation study and research center, said the 1 billion yuan and issuing the short-term bonds will, to some degree, help solve the root of the financial problem of SMEs in the PRD region.

"It is good the government and financial institutions are working together to help these companies. But in the long run, SMEs need to upgrade their businesses so as to survive in the shrinking global economic and trade market," Feng said.

Editor: Yan