A Study On Legal System Of Folk Lending In China

In recent years, along with the rapid development of Chinese economy, the folk lending as the effective complement of national “formal finance” has played a more and more important role in the national financial system, especially in the national economic development process; it provides financial supports for private enterprises, especially the middle and small-sized enterprises and meanwhile promote them to expand production capacities and improve their market competitiveness. However, compared with the rapid expansion of informal financial market, the improvement process for legal system of folk lending in China develops slowly, the risk preventing ability of informal financial market is poor and the subject investment consciousness is weak; therefore, there are no effective regulations for folk lending behaviors and no reasonable guidance for financial market development and the illegal folk lending behaviors still exist despite repeated prohibition. Hence, the current situation for the legal system of folk lending in China should be analyzed, the existing problems should be summarized and the feasible suggestions should be made.Firstly, the different viewpoints for the connotation of legal system of folk lending are concluded to make clear that the connotation of legal system of folk lending is that “it is a legal cash flow behavior among the natural person, legal person and other organizations that should not be supervised by national finance” based on the definitions in laws and regulations; through studying the six common forms, including private lending, civil financing, private bank, informal rotating savings and credit association, pawnshop and peer to peer lending, the three functions of legal system of folk lending are summarized, namely regulating folk lending behaviors, promoting the orderly development of folk lending and striking illegal folk lending behaviors.Secondly, the current situation of legal system of folk lending in China are analyzed from legislative system and judicial system respectively and it is found that there is no special law for regulating folk lending in current institutional system of China, the regulations on interest rate of folk lending is unreasonable, the regulations of existing legal system on folk lending is too strict and the informal financial market is lack of legal supervision and management; moreover, three reasons for the existing problems of legal system of folk lending in China are obtained through analyzing the judicial and legislative practice of folk lending at home and abroad, namely lagged legislative concept, biased government regulation pattern and restriction by folk lending subject.Finally, three aspects of significance for perfecting legal system of folk lending in China are put forward, namely conducive to the promotion for financial integration of Chinese financial market, the legal and orderly development of Chinese informal financial market and the trial of judicial practice on folk lending disputes and three principles are summarized, namely moderate control principle, precautionary principle and principle of efficiency first and consideration to fairness; moreover, four feasible suggestions are made for how to improve legal system of folk lending in China through the combination of empirical analysis and comparative analysis, namely making clear the scope and legal status of folk lending subject, determining the rights and obligations of lending and borrowing parties, endowing the control of folk lending interest rate of local government with moderate autonomy and constructing multi-layered legal supervision and management system of folk lending; among which, the legal supervision and management system construction is elaborated from three aspects, namely building the administrative regulation agencies of folk lending according to law, establishing the self-discipline organization of folk lending industry according to law and completing the supporting system of legal system of folk lending, that is integrating the folk lending information into social credit system.