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In this chapter we study internal and external, formal and informal, financing sources of Chinese firms during the period 1997–2006, by analyzing balance sheet data from the Chinese Industrial Surveys of Medium-sized and Large Firms for 2000–2006 and survey data from the Large-Scale Survey of Private Enterprises in China conducted in 1997, 2000, 2002, 2004, and 2006.

The following stylized facts emerge from our analysis: (1) State-owned firms continue to enjoy more generous external finances than other types of Chinese firms. (2) Chinese private firms have resorted to various ways of overcoming financial constraints, including reliance on the increasingly more mature informal financial markets, cost savings through lower inventory and other working capital requirements, and greater reliance on retained earnings. (3) Substantial variations exist in financial access among private firms, with small private firms facing more financial constraints whereas more established firms having financial access more equal to their SOE counterparts. (4) Although not as accessible as for SOEs, the Chinese formal financial sector does provide Chinese private firms with substantial financial resources, especially for their short-term needs during daily operations. (5) The most pressing financial constraint facing Chinese private firms is their limited ability to secure long-term funds to invest for growth, and resolving this issue should be one of the top goals of financial reforms in China.

This chapter insists that local cocreation projects need not only good intentions and the hard work of volunteers but also require funding and financing of the design and implementation of new solutions. It draws a conceptual distinction between funding and financing and explains who may help to provide funding and financing and why they may do so. As a part of this discussion, attention is drawn to the importance of writing good and persuasive funding applications and drawing up a strong and convincing business case to secure financing of new solutions. The new and emerging strategy for mobilizing private capital to help finance SDG projects is explained and illustrated, before closing the chapter with a discussion of the need to develop a proper system for fiscal accounting and auditing, which can prevent mismanagement and misconduct that eventually undermine popular support for local SDG projects.