Research On The Formation And Prevention Of Regional Credit Crisis In China From The Perspective Of Financial Suppression

Since the regional credit crisis has broken in Wenzhou in 2011, various regional credit crisis are still appearing continually. Frequent breaks have brought continuous negative effect, and regional economics are suffering seriously. The bottom line of the country to guard against financial risks is faced up with severe challenge. Taking a panoramic view of the credit crisis, and combing the current economic situation, we’ll find that the break of regional credit crisis will be new normal.Now brush up credit crisis conditions in different regions and conclude general characteristics basing on theories of financial repression to analyze the causes of the regional credit crisis. There are mainly three stages for the regions to experience when they’re faced up with a credit crisis, which include wealth accumulation promoted by pillar industries, virtual prosperity accelerated by nongovernment credit, economic turbulence led by fund chain break. There are three types of regions which are represented by Wenzhou, Eerduosi and Handan. They have different performance and similar evolution path.On the basis of sample analysis and international comparison, we mainly analyze the influence of financial dualism, capital-price distortion and excess liquidity on credit crisis within the frame of financial repression. Financial Dualism has led to undersupply of resources in the formal financial system, directly leading to the difficulty of financing and indirectly promoting the development of informal financial market. Capital-price Distortion has aggravated the dilemma of financing, even caused a result of excess capacity. Combing with other financial repression policy, excess liquidity has promoted the development of disorder and speed up the transfer of risk in the credit market. As a result, fund supply and demand have come to connection with the linkage of informal financial market, bypassing the formal financial system. And other problems which are caused by unsound legal system, absence of credit system and unscientific regulatory system have aggravated sprawl of nongovernment credit market. With a word, financial repression is the primary cause of regional credit crisis.On the basis of the theoretical analysis, we make an empirical analysis with 30 provincial data. It turns out that the root cause of frequent regional credit crisis is financial repression. At last, we provide suggestions from various aspects such as government action code, interest rate liberalization, financial market, financial system, credit system and supervision laws and rules.