Reflection On The Private Lending System

Being the core of modern economy, financial industry which offers conveniences for prolificacy and social life, drives the development of economy. Due to the financial mechanism and the Urban-rural dual system adopted by our country, there are regular and irregular finance in the financial industry. The irregular finance or the private finance which refers to the private lending somehow meets the needs while is kept covered because it is not accepted by the government. It exists vastly in Zhejiang and Jiangsu provinces where are the well-developed areas in China and under now the situations that a lot of small businesses can not find financial supports. Because it is not regularized and not supervised by the government, usury and illegal fund-raising prevail and lead to the bankrupt of small businesses, small business owners run at large and various violences. Usually, when it is discovered, it falls into troubles.The set of the Wenzhou finance comprehensive reform experimental zone is to make an institutional relief measures and a chance for the development of private finances. In the Wenzhou private finances development history since1980s, several chances like this one were missed for the governmental attitudes considering the risk prevention and the dominance of the financial resources. So that, the private finances have been in and out of control from the government. Being out of the regular mechanism, the private finances are evidently lost in its own growth, as the cases of Sun Dawu and Wu Ying showing.Financial industry is to offer services to economic development. Small businesses are the main forces to improve social life and economy. While supports from state-owned banks considering the potential risks are so pale that the small businesses have to turn to private lending for their necessary founds. The high interests rate practically reduces the actual profits of the real economies which are the bases of Chinese economy. It should be carried out simultaneously to lead the enterprises back to real economies and to lead private finances to efficient investments.This paper starts from the situations of private lending, with the aim to direct and regulate it with regulations and laws, studying on the typical cases and discussing about the problems and looking for possible ways for private lending, with the references of successful foreign experiences in private lending legislation and supervision, which includes the complete of laws and regulations, the loose of the access, the set of the sharing credit mechanism, the design of the feasible routs and etc to complete the private lending system.