Formal And Informal Financing Channels In China
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| Author | : Jianjun Li |
| Publisher | : |
| Total Pages | : 216 |
| Release | : 2009 |
| Genre | : Business & Economics |
| ISBN | : 0195380649 |
Informal finance consists of nonbank financing activities, whether conducted through family and friends, local money houses, or other types of financial associations. It has provided much-needed financing to small and medium enterprises (SMEs) in particular, in the face of a tightly constrained and overburdened formal banking system. Unable to obtain a bank loan, firms have relied upon individuals and informal organizations outside of the banking system to obtain financing for their ventures or working capital (operating funds). Presently there is a scarcity of information on informal finance in China and it is expected to have a significant impact upon GDP and money supply. This book, with contributions from leading scholars, describes the evolution, characteristics, and variation of informal finance in China from American and Chinese perspectives. Literature by Jiang Shuxia, Jiang Xuzhao, and Li Jianjun has heretofore been available only in Chinese, while work by Kellee Tsai, Jianwen Liao, Harold Welsch, David Pistrui, and Sara Hsu has been available in English. For the first time, they come together to discuss informal financing and its many aspects. Most of the essays are based upon original survey research conducted locally, as this type of data is not normally collected by the government. The papers pioneer the description and analysis of the nuances of informal finance from several perspectives; the authors look at the social, cultural, political, and economic causes of informal finance, its many variations, and its economic, personal, and political ramifications.
| Author | : Vojislav Maksimovic |
| Publisher | : World Bank Publications |
| Total Pages | : 77 |
| Release | : 2008 |
| Genre | : Access to Finance |
| ISBN | : |
Abstract: China is often mentioned as a counterexample to the findings in the finance and growth literature since, despite the weaknesses in its banking system, it is one of the fastest growing economies in the world. The fast growth of Chinese private sector firms is taken as evidence that it is alternative financing and governance mechanisms that support China's growth. This paper takes a closer look at firm financing patterns and growth using a database of 2,400 Chinese firms. The authors find that a relatively small percentage of firms in the sample utilize formal bank finance with a much greater reliance on informal sources. However, the results suggest that despite its weaknesses, financing from the formal financial system is associated with faster firm growth, whereas fund raising from alternative channels is not. Using a selection model, the authors find no evidence that these results arise because of the selection of firms that have access to the formal financial system. Although firms report bank corruption, there is no evidence that it significantly affects the allocation of credit or the performance of firms that receive the credit. The findings suggest that the role of reputation and relationship based financing and governance mechanisms in financing the fastest growing firms in China is likely to be overestimated.
| Author | : Lihong Wang |
| Publisher | : |
| Total Pages | : 32 |
| Release | : 2013 |
| Genre | : Finance |
| ISBN | : |
| Author | : Meghana Ayyagari |
| Publisher | : |
| Total Pages | : 77 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
China is often mentioned as a counter-example to the findings in the finance and growth literature since, despite the weaknesses in its banking system, it is one of the fastest growing economies in the world. The fast growth of Chinese private sector firms is taken as evidence that it is alternative financing and governance mechanisms that support China's growth. This paper takes a closer look at firm financing patterns and growth using a database of 2,400 Chinese firms. The authors find that a relatively small percentage of firms in the sample utilize formal bank finance with a much greater reliance on informal sources. However, the results suggest that despite its weaknesses, financing from the formal financial system is associated with faster firm growth, whereas fund raising from alternative channels is not. Using a selection model, the authors find no evidence that these results arise because of the selection of firms that have access to the formal financial system. Although firms report bank corruption, there is no evidence that it significantly affects the allocation of credit or the performance of firms that receive the credit. The findings suggest that the role of reputation and relationship based financing and governance mechanisms in financing the fastest growing firms in China is likely to be overestimated.
| Author | : |
| Publisher | : |
| Total Pages | : |
| Release | : 2010 |
| Genre | : |
| ISBN | : |
| Author | : Kellee S. Tsai |
| Publisher | : Cornell University Press |
| Total Pages | : 340 |
| Release | : 2002 |
| Genre | : Business & Economics |
| ISBN | : 9780801489174 |
Chinese entrepreneurs have founded more than thirty million private businesses since Beijing instituted economic reforms in the late 1970s. Most of these private ventures, however, have been denied access to official sources of credit. State banks continue to serve state-owned enterprises, yet most private financing remains illegal. How have Chinese entrepreneurs managed to fund their operations? In defiance of the national banking laws, small business owners have created a dizzying variety of informal financing mechanisms, including rotating credit associations and private banks disguised as other types of organizations. Back-Alley Banking includes lively biographical sketches of individual entrepreneurs; telling quotations from official documents, policy statements, and newspaper accounts; and interviews with a wide variety of women and men who give vivid narratives of their daily struggles, accomplishments, and hopes for future prosperity. Kellee S. Tsai's book draws upon her unparalleled fieldwork in China's world of shadow finance to challenge conventional ideas about the political economy of development. Business owners in China, she shows, have mobilized local social and political resources in innovative ways despite the absence of state-directed credit or a well-defined system of private property rights. Entrepreneurs and local officials have been able to draw on the uncertainty of formal political and economic institutions to enhance local prosperity.
| Author | : Tong Li |
| Publisher | : |
| Total Pages | : 214 |
| Release | : 2005 |
| Genre | : Agriculture |
| ISBN | : |
| Author | : Lerong Lu |
| Publisher | : Routledge |
| Total Pages | : 246 |
| Release | : 2018-12-07 |
| Genre | : Business & Economics |
| ISBN | : 0429823908 |
This book explores China’s private lending market from historical, economic, legal, and regulatory perspectives. Private lending refers to moneylending agreements between business borrowers and their debt investors without the involvement of banks. In China, it remains difficult for private entrepreneurs to obtain sufficient loans from state-owned banks. Thus, private lending has been a vital alternative financing channel for over 80 million businesses which are reliant on private funds as their major source of operating capital. The market volume of private financing stands at 5 trillion yuan ($783bn), making it one of the largest shadow banking systems in the world. Despite the wide popularity and systemic importance of private lending activities, they have remained outside of the official regulatory framework, leading to extra financial risks. In 2011, China’s private lending sector encountered a severe financial crisis, as thousands of business borrowers failed to repay debts and fell into bankruptcy. Lots of bosses who found it impossible to liquidate debts ran away to hide from creditors. The financial turmoil has caused substantial monetary losses for investors across the country, which triggered social unrest and undermined the financial stability. This book is a timely work intended to demystify China’s private lending market by investigating its historical development, operating mechanism, and special characteristics. It evaluates the causes and effects of the latest financial crisis by considering a number of real cases relating to helpless investors and runaway bosses. It conducts an in-depth doctrinal analysis of Chinese laws and regulations regarding private lending transactions. It also examines China’s ongoing financial reform to bring underground lending activities under official supervision. Finally, the book points out future development paths for the private lending market. It offers suggestions for global policymakers devising an effective regulatory framework for shadow banking. It appeals to researchers, lecturers, and students in several fields, including law, business, finance, political economy, public policy, and China study.
| Author | : Kam C. Chan |
| Publisher | : |
| Total Pages | : |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Informal finance plays an important role in transitional economies with weak legal institutions, like China. As a major informal finance instrument, trade credit relies on informal institutions and enforcement. We argue that religion enhances the ethical climate of business and predict that religiosity increases trade credit in that religion enhances enforcement by increasing non-pecuniary cost and reducing risk-taking. The results of Chinese non-state listed firms between 2003 and 2013 confirm our prediction that firms located in high religiosity regions are associated with larger trade credit, especially in regions where formal institutions are weak or formal financing channels are limited. Furthermore, we show that religiosity reduces the overdue trade credit. Finally, the results are driven by Buddhism, Taoism and Christianity but not Islam. Our finding provides evidence that the geographic proximity to religious doctrines enhances the enforcement of contract through fostering trust.
| Author | : Xingyuan Feng |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2023 |
| Genre | : Economic development |
| ISBN | : 9781138955592 |
Finance in Rural China provides insight into scholarly debates and perspectives on formal and informal finance in rural China, which have been underrepresented in the literature. The book covers the subject in two parts: an overview on the overall development of rural finance in China and the necessity of going a path toward rural financial pluralization by introducing a "Local Knowledge Paradigm" while Part II analyzes rural formal and informal financial development in China in various dimensions. The book aids the understanding of the structure of the rural financial system and the operation of rural financial service providers in China.
