Research On The Stall Bank Under The Perspective Of Informal Finance

"Stall bank" is a specific product which rarely occurs in the history of financial literature and textbook and a special phenomenon derivatived from cash transactions in the early stages of trade between China and Vietnam, therefore, the questions of stall bank are given less attention by informal financial scholars。This paper does some research on the stall bank, which massively plays a great role in the payment and settlement of border trade.In the guiding principle of building up the amicable, friendly and prosperous neighborliness, China has been unceasingly developing the exchange with its neighboring countries in such fields as politics, economy and trade, and culture. The strengthening development of border trade between China and its neighboring countries, especially with Vietnam, has greatly promoted the prosperity of the borders economically.Because of the contradictory between the needs of the payments and settlement in border trade and the lack of financial services from formal financial institutions, an informal financial institution, named stall bank, emerges to meet the needs. It is an alternative to service functions of the formal financial institutions.Stall Bank comes into being in accordance with the development of border trade, especially in Sino-Vietnamese border. Along with changes in economy and Sino-Vietnamese relations, its lines of business have been continuously expanded, its business varieties have been constantly increasing and its business scales have been unceasingly obtaining new breakthroughs. Since the Vietnamese government publicly acknowledged the legitimacy of Stall Bank and granted the business licenses for legal operation, it has got larger development space.However, the concerned regulatory department of China doesn’t admit the legal status of Stall Bank at present. Therefore, Stall Bank is exposed to such an embarrassing situation that it is legal in Vietnam but not lawful in china. Despites that, in practice though, Chinese government doesn’t take stern actions to crack them down with "one size fits all" policy, but to give tacit consent to its existence and development and allow them to provide financial services, since the great impact Stall Bank has on border trade, payment and settlement, currency exchange, decision of the exchange rate between China and Vietnam and the cross-border circulation and internationalization of RMB.Therefore, it is meaningful both in theory and practice to further investigate and research Stall Bank, discuss its advantages and disadvantages of its existence, study the necessity of its existence, and put forward some suggestions on the future development of Stall Banks and how to supervise and administrate them. Based on the reference and summary of numerous related research achievements both at home and abroad, this paper makes some Analysis And Investigation on Stall Bank from eight aspects in the following chapters.The first chapter is introduction, which are mainly the general idea and prospective instruction of the full text. summaries the related literature on study of Stall Banks. It contains brief but overall introduction to the background and significance of the research, the main contents and the research approaches, the structure of the paper and the chief conclusion and innovations.The second chapter looks into non-formal financial issues, which is also the theoretical basis of the research in this paper. A general and inclusive introduction to non-formal financial issues is made in such aspects as research status and research findings, which establishes a theoretical foundation laid for the research of Stall Banks in the chapters that follow.The third chapter firstly throws lights on the historical background, cultural background and economic background of Stall Banks, Then, the development history of as well as the process and reasons of its transformation from illegal to legal in Vietnam is analyzed. Then this paper deals with the hazards of Stall Banks. With relevant cases, this chapter analyzes the disadvantages and hazards of Stall Banks, and emphatically points out that its advantages outweigh disadvantages. The study on the hazards of Stall Bank is not to deny the value of Stall Banks, but to form a more scientific and rational understanding from the dialectical perspective so as to draw on its advantages and avoid disadvantages effectively supervising stall banks and reducing hazards of Stall Banks to happen, which may result in better roles that Stall Banks play in facilitating the payment and settlement in border trade payment and the RMB cross-border circulation. Finally, this chapter gives an prospect forecast for its development trend, and get preliminary conclusion that Stall Banks will be existing and developing for a long time, which provides an foundation for further study of Stall Banks.The fourth chapter discusses the relations of Stall Banks and border trade. It focuses on the advantages of developing border trade in Sino-Vietnamese border, the development history, the characteristics of the present border trade, the current situation of payment and settlement in border trade, and its existing problems. Besides, the roles that Stall Bank plays in payment and settlement in border trade are analyzed in this paper. Through the analysis, this paper affirms positive effects that Stall Banks have in all the aspects of facilitating the intercourse among inhabitants of the border area, promoting border trade and solving the problem of payment and settlement in border trade.The fifth chapter is about the determination of currency exchange rate between China and Vietnam in black market. Based on the overview of related research findings, this chapter empirically analyzes the determining factors of the black market exchange rate with modern metering methods, and discusses the roles Stall Banks play the determination of currency exchange rate between China and Vietnam in black market. In addition, the formation mechanism of Sino-Vietnamese exchange rate and the reason for the pricing rights devolution of commercial banks are observed. At the same time, this chapter attempts to construct a new trading mechanism for currency exchange contributing to the formation of market price. From what have been discussed above, it is found that the exchange rate decided by Stall Banks basically mirrors the real currency price between two countries. It is in fact the cross rate between two countries which fluctuates with the conditions of demands for CNY and VND in the market. Hence the research under the condition that Stall Banks manipulate currency exchange rate on the black market research is meaningful, which is also shed light for RMB exchange rate reform.The sixth chapter looks into the relationships between Stall Banks and the cross-border circulation as well as internationalization of RMB. This paper mainly analyzes the impact Stall Banks have on the cross-border circulation and internationalization of RMB. It is believed that though there is great achievement in the cross-border circulation and internationalization of RMB at present, the problems like currency sovereignty and coins tax revenue have been involved in, which has, to some extent, brought about anxiety even hostility from some countries and regions. Assume that the wit of "ping-pong diplomacy" is employed through the folk approach such as Stall Banks, political factors may be conveniently avoided, thus smoothly promoting nongovernmental cross-border circulation and the rapid development of RMB internationalization.The seventh chapter deals with The eighth chapter investigates the specification and development of the Stall Bank. Based on the analysis of the necessity of being and the vital roles of Stall Bank has played, this paper analyzes the regulatory approaches and the future prospects of Stall Banks and raises proposals on specifications and supervision of Stall Banks, which provides the reference for the restruction of Stall Banks and relevant policies made by government. This paper believes that it is the lack of formal financial services in border areas, and the needs bloom of relevant services that lead to the rapid development of Stall Banks. Therefore, this chapter makes suggestions of normalizing Stall Bank to play its positive role of constructing formal financial service system in the borders, which can not only weaken the dependence of border trade on Stall Banks but also better promote the overall economic prosperity and development in border regions.There have three main points of innovations in this paper.First, this paper is the first to look into the issue of Stall Bank in a comprehensive and multi-angle approach. Few studies focused on Stall Bank though it has been in existence for a long time. Even if some, most is taking in generalities without in-depth analysis in such aspects as its generation mechanism, operation mechanism, exchange rate determination and so on. This paper, under the guidance of the informal financial theory, is the first to analyze and interpret the Stall Bank from a comprehensive perspective, probe into the historical trace of its emergence and development and analyze its possible future development trends and directions. This study found that the development of Stall Bank has its historical inevitability, and also can play a positive role in the particular historical stage. For example, its role of facilitating the RMB cross-border circulation promotes the internationalization of RMB. What’s more, its leading role in the determination of Sino-Vietnamese currency exchange is in favor of the study on the reform of marketization of the RMB interest rate. Understanding the future direction of Stall Bank, therefore, standard management and scientific guidance for Stall Bank are necessary, which may contribute to the promotion of border trade development.Second, through the investigation into the tremendous roles Stall Bank has played in the border trade as well as that in the currency exchange, the exchange rate detemination, the RMB cross-border circulation and RMB regionalization, this article, for the first time, argues the significant rule that Stall Bank has played in a comprehensive and multi-angle approach, demonstrates that attacking or smashing the Stall Bank is absolutely unnecessary with sufficient theoretical foundations. In this paper the best measures are come up with to regulate the Stall Bank with standardized norms, turn disadvantages into advantages, and make full use of the roles of Stall Bank. And it for the first time proposes to establish small currency exchange, allowing the Stall Bank to enter trade after registration. It is in favor of clearing the liquidation which is caused by commercial banks in border trade payments, also strengthening supervision and management of Stall Bank, and constructing a reasonable exchange rate formation mechanism.Third, for the decision of the black market exchange rate between China and Vietnam, most scholars believe that it is dominated and determined by the stall bank. Because of the lack of the research data, researchers do not know exactly that the stall banks how to determine the exchange rate. Based on the data of official exchange rate, black market exchange rate and net exports of border trade of china and Vietnam, this article uses the vector error correction model(VECM) and analyses the relationship among the three variables.In order to further clarify the relationship between the variables, the article makes the granger causality test, impulse response function test and variance decomposition analysis.This article shows that the black market exchange rate is decided by the official exchange rate and affected by net exports, the official exchange rate and black market exchange rate have obvious influences, and net exports have certain influences to black market exchange but no obvious influence to the official exchange rate.