A Study On Some Legal Problems Of Non - Governmental Loan In China

Different from the lending activities involving financial institutions, private lending is a spontaneous financial activity between the lender and the borrower(the lender is not a financial institution and sometimes the borrower either). It is a sort of financing for the borrower, and a kind of investment for the lender. Through private lending, both the lender and the borrower can avoid the stringent loan conditions of financial institutions, put the capital in place timely and get rid of the cumbersome regulation. Therefore, small-sized enterprises and individuals with smaller capital flow or less capital demand would consider private lending as a major channel to take in capital or to invest, which has long existed in China.In recent years, with the market-driven features of the economy at full play as well as the gradual relaxation of the state economic control, the private sector plays an increasingly significant role in the market economy. The demand for capital of private enterprises is hardly satisfied through the formal financing, and private lending therefore becomes more frequent. There even has come into being some private lending towns or villages. “Baoma” village in Sihong County, Jiangsu Province is such a village.It can be said that the frequency and significance of private lending is no less than that of formal financing. However, laws and legal regulation about private lending is lagging far behind. The private feature of private lending should not prevent private lending from being legally regulated like formal financing activities. The lack of regulation of private lending has long drawn the attention of both the academics and the practitioners. It is not until September 1st, 2015 that the long-expected “Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases” has come into being. The introduction of these provisions is not only unclarity-removing but also ground-breaking. It defines issues like the subject and interest of private lending or the validity of lending contract, makes clear the relevance between the lending contract and the contract of sale, and involves the regulation of private lending on the Internet. Against the backdrop, this thesis looks into the major issues and new problems of the current private lending system in China. This thesis discusses the changes of the system as well as the reasons for and implication of these changes. Learning from systems of other jurisdictions, this thesis also makes some humble advice for certain issues in China’s private lending.As aforementioned, this thesis plans to study the changes and new priorities of private lending system in accordance with “Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases”. It therefore includes the following four parts. The first part looks into the qualification of private lending subject and discusses the legitimacy of the interenterprise lending as a major breakthrough of this judicial interpretation. The second part analyzes the interest rate of private lending and considers the three-stage fixed-rate standard set by the Provisions a reform in private lending. Then the thesis focuses on the peer-to-peer(P2P) online lending which as the internet economy develops has become an emerging private lending mode. Mainly about the protection of the creditors in accordance with the Provisions, the last part studies the validity of the private lending contract and the relationship between the private lending contract and the contract of sale.