China Guarantee Agencies Bankruptcy Plunder Its Supervision

Since 2000, Guarantee Institutions have got a fast development in China. Meanwhile, the risks associated with this development loomed gradually and loan assets of banks suffered great losses.This dissertation is aimed at analyzing specific risks associated with guarantee institutions in China and recommending appropriate measures to be taken to control such risks.First of all, based on the principles of financial contract theory as well as the research works of two economists: George Acheron and Paul Rome, the author developed a model - the model of maximizing cash flow- to analyze the behaviors of guarantee institutions. The model indicates that the lacking of appropriate supervision may entice guarantee institutions to adopt strategy of bankruptcy to loot social property. In this model, based on the business nature of guarantee institutions that mainly handle with contingent liabilities, the author adopted uncertainty analisis to best describe the behaviors of guarantee institutions and unveil the mechanism as well as the root of the looting behavior and how guarantee institutions retrogressed to loot. As well, the author analyzed the great harms brought by looting behaviors. The looting behaviors will not only cause the misallocation of social resources, but also jeopardize the specific industries (including guarantee industry, middle and small sized enterprises etc) as a whole and trigger pertinent social conflicts.Secondly, the author analyzed the china's present supervision systems and focused the research on their imperfections. The dissertation pointed out that all existed three supervision systems: market competition system, personal litigation and public supervision have their own faults in supervising guarantee institutions. Probing deeply into the historical background, internal mechanism and present situation of those three supervision systems, the author concluded that excessive interferences from the government under market economy system are the main causes of the defaults of supervision systems. So the successful control of the risks of looting behavior depends on how and to what extent to change the role of the government in a market economy system.