Meanwhile, although China encourages foreign organisations to set up scientific research centres in the mainland, few are really interested because the current business environment is not considered favourable. However, after China enters the WTO, its business environment is expected to improve significantly. Software is a capital-intensive industry. At present, China's software industry is still in its development stage where the foundation is relatively weak and the scale of enterprises generally small. Besides, these enterprises lack access to financing and have to rely on operating profits to fund business expansion.
Banks are the primary source of financing for mainland enterprises.
As a rule, banks follow conservative operation guidelines and require fixed asset collaterals or credit guarantee in extending commercial loans. However, the most valuable assets of hi-tech enterprises are often intangible. As such, software enterprises find it very difficult to obtain financial support from banks. Issuing bonds is another major channel for raising capital. In China, however, only large enterprises are allowed to issue shares and bonds.