Private Lending in China: Practice, Law, and Regulation of Shadow Banking and Alternative Finance

This book explores China's private lending market,which is one of the largest shadow banking systems in the world. It provides a historical, economic, legal, and regulatory perspective on the market, which remains difficult for private entrepreneurs to access loans from state-owned banks. Despite its popularity, the market has remained outside of the official regulatory framework, leading to extra financial risks. In 2011, a severe financial crisis occurred in the sector, causing monetary losses for investors and triggering social unrest. The book aims to demystify the market by investigating its development, operating mechanism, and characteristics, and evaluates the causes and effects of the latest financial crisis. It also examines China's ongoing financial reform to bring underground lending activities under official supervision and offers suggestions for global policymakers devising an effective regulatory framework for shadow banking.

Format: Paperback / softback
Length: 198 pages
Publication date: 30 June 2021
Publisher: Taylor & Francis Ltd

This comprehensive book delves into the intricate world of China's private lending market, offering a multi-faceted exploration from historical, economic, legal, and regulatory perspectives. Private lending, as opposed to traditional banking, involves direct agreements between business borrowers and their debt investors, bypassing the involvement of banks. In China, however, private entrepreneurs face significant challenges in accessing sufficient loans from state-owned banks, leading to the emergence of private lending as a vital alternative financing channel for over 80 million businesses. With a market volume of 5 trillion yuan ($783 billion), private financing stands as one of the largest shadow banking systems globally. Despite its widespread popularity and systemic importance, private lending activities have remained largely outside the purview of official regulatory frameworks, thereby exposing investors to heightened financial risks.

In 2011, the private lending sector in China experienced a severe financial crisis, marked by a significant number of business borrowers defaulting on their debts and ultimately declaring bankruptcy. Many of the bosses who found themselves unable to liquidate their debts resorted to fleeing to avoid creditors, further exacerbating the financial turmoil and triggering social unrest. This crisis resulted in substantial monetary losses for investors across the country, undermining financial stability and fueling public outrage.

The book aims to shed light on the complexities of China's private lending market by examining its historical development, operational mechanisms, and unique characteristics. It provides a comprehensive evaluation of the factors that contributed to the recent financial crisis, including real-life cases involving helpless investors and runaway bosses. Through an in-depth doctrinal analysis of Chinese laws and regulations related to private lending transactions, the book offers valuable insights into the legal framework governing this sector. Additionally, it explores China's ongoing financial reform efforts to bring underground lending activities into the mainstream and regulate them effectively.

By examining the historical, economic, legal, and regulatory aspects of private lending in China, this book provides a comprehensive understanding of this important financial sector. It serves as a valuable resource for scholars, policymakers, investors, and business professionals seeking to navigate the challenges and opportunities presented by China's private lending market.

Weight: 290g
Dimension: 234 x 156 (mm)
ISBN-13: 9780367513955