Studies On Wenzhou Civil Financial Issues

In recent years, with the outbreak of private lending crisis and the subsequent establishment of financial reform pilot area in Wenzhou city, civil financial problems once again become a topic of concern. As people are giving more attention to financial problems, it is an appropriate time to analyze the civil financial problems in Wenzhou city to understand its internal mechanisms and principles, derive practical enlightenment, and provide some inspiration for Wenzhou’s financial reform.The general idea of this paper is described as follows:To discuss the formation mechanism, reasonability and limitations of model of Chenghui, Chenghui is studied and analyzed through multiple perspectives including micro-mechanism, characteristics of interest rate, sources of efficiency and practical enlightenment. Besides, suggestions are given to the financial reform in Wenzhou based on the discussion of Chenghui.This paper has a total of six chapters:The first chapter gives a brief introduction about research significance, research methods and basic ideas. It points out that based on the concepts of Chenghui, analyzing civil financial problems in Wenzhou is not only a good perspective to get started, but also a significant parameter of Wenzhou financial reform.The second chapter includes basic concepts, theoretical basis and a review of literature. It summarizes the literature mainly from three aspects:civil financial, ROSCA and Chenghui. And it indicates that the social utility and social costs need to be considered during the study of civil financial problems. Thus this study will be based on the assumption of "rational human".The third chapter states the micro-mechanism of Chenghui. Based on the research of information delivery mechanism and restriction mechanism of Chenghui, it is found that the mode of Chenghui reduces the transaction costs efficiently, increases the penalty cost of default events, helps participants assess risk, and have a good stability. Moreover these two mechanisms can only have an effect within the relative network; they will lose their effects when the mode of Chenghui is expanded. For example, Wenzhou private lending crisis is the result of destruction of the two mechanisms due to the malignant expansion.The forth chapter describes the calculation method of implicit interest rate, which has been designed by establishing a mathematical model. This calculation method can be applied into analysis of specific cases and the results are as follows: under the mode of Chenghui, if it is considered from a financing point of view, which means from the partial financer’s viewpoint, the validity of Chenghui depends on whether it has access to loan from formal credit market; but if it is considered from an investment point of view, which means from partial investor’s viewpoint, Chenghui is the most efficient method regardless of whether it has access to deposit into formal credit market.The fifth chapter describes practical enlightenment. A new mode of Chenghui is established on the civil finance service platform.The sixth Chapter makes a conclusion of this paper, and indicates the limitation of research and future work. In conclusion, based on the characteristics of the micro-mechanism and interest rates, Chenghui has several financing advantages including reducing transaction costs, providing a stable restraint mechanism and improving the efficiency of investment, Chenghui’s long widely exist in Wenzhou folk also indicates it is rational. However, its efficiency is dependent on prerequisites of realistic basis, it has limitations and the blind expansion will lead to private lending crisis. A feasible approach can be built and applied to supervise and regulate Chenghui through the establishment of a new mode of Chenghui based on the service platform.