Non-governmental Borrowing And Lending Risky Management Research

Non-governmental borrowing and lending (NGBL) as an ancient way of collecting capital is not vanishing in modern China. Rather, it is flourishing day by day and contributing to the economic development of certain areas and in certain fields. Unfortunately, however, it is still not accorded a legal status, nor is its positive role recognized. This situation points to the fact that NGBL has both positive and negative effects on social and economic development. To be more specific, NGBL enhances economic development and social stability, but in the meantime, it also brings about certain risks. As such, it is inappropriate to completely affirm or negate NGBL. it is also inappropriate to give free rein to it or simply ban it. A more reasonable attitude should be to acknowledge its positive effects and bring these positive effects into full play by providing a favorable enviromnent, while at the same time minimizing its negative effects through thorough risk analysis and effective risk management.Currently research on NGBL in the academia is still sporadic and at its preliminary stage. Based on a comprehensive and in-depth review of existing literature and on-the-spot investigation, this study points out that its comparative advantage and the supply-demand relationship of the capital market are two reasons why NGBL still widely exists. It also summarizes the positive and negative effects of NGBL and looks into the root causes of its negative effects. The study points out that those negative effects are attributed to both its own drawbacks and the external environment, and that although some of the negative effects were originated in NGBL, NGBL should not take the blame. This study divides these negative effects into three categories, and provides recommendations to regulate and manage NGBL so as to offset these negative effects. These recommendations are: 1) on the macro level, the problem of imbalance between supply and demand in capital market must be solved once and for all, and the comparative advantage of NGBL must be eliminated; 2) on the micro level, NGBL must be further regulated so that it contributes to rather than hinder social and economic development; and 3) NGBL-related tort must be checked and penalized through legal actions. The ultimate purpose is to eliminate the risks that the NGBL's negative effects may cause to national economic development and social stability.