Credit System In China

The reform of China is now reaching a crucial stage, which faces some deep level problems, including the reform of property right system, the reform of political system, the reform of financial system and to increase the inner quality of the people. All the problems are related to the establishment of credit system. So this dissertation is centered on the problem of credit in China by analyzing the common features of credit and credit system.Market economy is credit economy, of which credit is one of the basis, but the participants don't actually observe it in practice. Their compliance with it or not largely relies on credit systems, and defects in these systems constitute the violation of credit. So in view of institutional economics, credit is not only an ethic criterion or exchange mode but also a kind of institution. Credit system could be defined as rules insuring a smooth credit transaction, functioning to establish credit mechanism; to preserve credit behavior and order as well; and to ultimately lead the country's market economy into a smooth credit one with the credit exchanges centered. Credit system consists of formal and informal system, of which the latter emerged from the historical evolution and exerted a subtle influence on and to constraint human behavior. Furthermore, the informal system has a great impact on the changes and efficiency of the formal one. With the advancement of credit and the further division of labor, the tendency of this system is the rise of informal rules into formal ones with the transaction cost decreased as well.Whatever credit system would presume that the immediate purpose of the market participants'abiding by credit or not is to maximize their profit, whether they are individuals, enterprises or government agencies. Therefore, the credit system mainly functions, by higher cost for violation, while higher profit for abidance, so as to establish a long-term mechanism maintaining credit orders. To reach the goal, two crucial points are information transmission and punishment for violation (or rewards for abidance). The punishment, either for government agencies or individual citizens, should take the participants'awareness as prerequisite. Therefore, the key in the credit system is the transmission of credit information and a proper running mechanism. However, the traditional and the modern, the Chinese and the western differentiate it. In old times when people are confined to their community, the individuals'violation would be quickly rumored without the help of the information agency.