The Study On The Development Of Folk Finance In China

With the reform and opening up, Chinese economic main body is a planned economy toa market economy, the rapid development of the private economy, and finance as the core of modern economy, it not only has the function of financing, but also through the credit and restrictive,effectively optimize the allocation of resources. The formal finance as the main body of China’s financial development in the economy plays an important role, but in the development of our country rural and urban in the folk finance is an indispensable. The folk finance has many forms, thereare underground banks, private funds, private lending.According to the relevant data show that, since the reform and opening up, China’s folkloan scale has exceeded the formal finance and informal finance credit scale, the scale is increasing year by year. In fact, the folk finance in China are ancient, as there was no official financial institution run, in the currency of transaction and circulation, the folk finance has played an irreplaceable role. To the Ming and Qing Dynasties, the folk finance to pawn shops, banks, banks reflected, the period of civil finance in China also reached gold period. No folk financial existence, thereis no growth of small and medium-sized enterprises, there is no development of the private economy. Relying on its unique mechanism of informal finance is flexible and efficient mode of operation is active in the folk, especially in China’s economically developed eastern coastal areas, folk lending has quite large proportion in borrowing funds in rural and urban areas, small and medium-sized enterprises, especially in the individual industrial and commercial households in the proportionof larger. After the reform and opening up, the rise of township enterprises, produced a huge demand for funds. The monopoly of state-owned banks in China’s financial, because small and medium-sized private enterprises overall risk bearing capacity of poor, weak credit status, so the state-owned commercial banks tend to lend the money to large state-owned enterprises. Therefore, small and medium-sized enterprises can only rely on private financing as an important channel.Wenzhou as one of the folk financial development the most prosperous region, its rapid economic development is inseparable from the folk financial support. The fund provides strong private capital for the development of small and medium-sized enterprises, private lending plays an irr eplaceable role in the establishment and development of small and medium-sized enterprises, the development of economy of Wenzhou to produce a business team to go forward with great strengthand vigour, distribution of investment across the country to start a business, but these investors of the original capital and not by the official bank financing loans, mainly come from private lending. The big four banks continue to carry out reform and financial innovation, but not given to small private enterprises strong financial support, in China, indirect financing market, banks and otherfinancial institutions have the right business monopoly of capital, the strict credit constraint mechanism for the function is not perfect for small and medium-sized enterprises financing difficulties caused by the the problem. In the direct financing market, securities have strict conditions, small andmedium-sized enterprises are almost shut sb. So the small and medium-sized enterprise financingchannels become more narrow, single. In this case, forcing the folk financial in underground continuous development, and launched a fierce competition with the formal financial.After the founding of new the People’s Republic0f China, banks of China are state-owned business, an individual has no right and general institutions engaged in financial business, as long as it is not private loans approved by the people’s Bank of China are regarded as illegal. However, so far there is no introduction of relevant laws, to distinguish between what is a private lending legal, what is illegal absorbing public deposits, no clear boundaries, will lead to some people in the pursuit of great profits, illegal fund-raising, speculation, fraud. According to the investigationreport shows, reaching about six hundred billion yuan only generation of Wenzhou folk capital, inthe process of rapid development of folk finance, also accompanied by a lot of illegal fund-raising case, including the Zhejiang real, speculation coal, run away, capital outflow phenomenon. Due to funding strand breaks, high interest many enterprises operating profit repayment difficult, or theirown security of a huge sum of money to the recovery of principal and interest, have a lot of Wenzhou entrepreneurs " run away " just a few months, and even Dutch act. In the development process of Wenzhou folk finance, once to the point of madness, it may have a "Domino" effect, theentire national economy will be affected.Hence, the folk finance has its shortcomings and weaknesses, it is usually hidden, dispersed, no standard operational mechanism, the risk is relatively large and difficult to control. Everythi ng has two sides, the folk finance as a kind of economic phenomenon in general, the developmentof our country economy still plays a positive role. Defect for private finance, the government should pay more attention to laws and regulations as soon as possible, perfect civil finance, to promote the development of the financial service specification, in the general economic target of our country, this paper first describes the process of concept, category, folk finance development, analyzesthe necessity of its existence, folk lending in Zhejiang Wenzhou for example, expounds the folk financial development present situation and the existing problems, finally puts forward the standardization of the folk financial development countermeasure and the suggestion, makes the full risk underground financing become promote economic development vigor and the source.