A Research On Non-government Financial Rate

Quality of a country's economic development is closely related to level offinancial development. Whether it is in developed countries, or in developingcountries or in transition countries, financial innovation or financial restraint will beinhibited development of the informal finance. In some sense, the informal finance isa product of financial restraint. Meanwhile, it is a worldwide phenomenon.Based on studying mainly a comprehensive review of interest rates of evolutionoperating mechanisms in the non-formal financial, the internal mechanism of thenon-government financial development in China's informal finance,and so on, thearticle found that the borrow-loan interest rates have tended to the market, at a"duality" of vertical state, that the coexistence of low interest rates and high interestrates. This "dual" state, on the one hand, based on structure of China's social sphere—"favors reliance"—leads to the low-interest loans, or even silent in both sides. Onthe other hand, profit-making capital of the nature can intentionally break low-interestof the layered structure, naturally evoluted the direction of higher interest rates.Further investigation found that the non-formal financial is informal interestcommunities essentially. Performance of their interests reflected in the main channelintends to circumvent the law to obtain the necessary economic resources, to strugglewith vested interest group of the system in the long-term interests of the game.Informal interest community in order to ensure their interests to maintain thecontinuity, largely dependent on the endogenous mechanism for long-term relief, itsessence is the use of the strong effective supervision of the key variables, such asassociated contract, social capital, personal reputation, profitical communities,community unity. After making this, the supervision becomes possible and effectiveand reduces transaction costs. In other words, long-term relief mechanism is a variantof legal remedies—quasi-legal, the mixture with moral or consultation. Interestingly,when the non-formal financial was inhibited by formal financial or state laws,individuals and civil societies trend to more marginal innovation to improve theirs inthe disadvantageous position. However, the pressure of marginal innovation comesfrom the reality.Through specialized research and investigation on the non-formal finance indeveloped region in Wenzhou, this paper found that Wenzhou is a period of rationaltransition, form the sustained, rapid and active development to the trend of a gradualslowdown in growth, or even stagnation awkward position, and gradually edge of theregional financial structure. The emergence of such a phenomenon is not accidental,but a cyclical phenomenon of illegalization of the non-formal financial. It also foundthat it plays an important role of private economy in local development. It is generallybelieved that the non-formal financial risks is so high, but not in Wenzhou, even lowerthan the state-owned banks. That it keys to risk dissipation is spontaneous due tocredit transactions borned in its borrowing mechanism, played a risk reduction or risk transferred effect.Spontaneous risk dissipation system and "commercialism" culture inWenzhou Commons to promote the maximum rent credit, and demonstrate itsdiscount rate through management system. Further study found that the part risk ofthe non-formal financial comes from the system, partly from non-systematic risk.Under certain conditions, the system can exchange risk from non-systematic risk eachother. System risk can be passed within the internal dissipation system to resolve thedispersed nature of the risk, but non-systematic risk only can transfer througheffective institutional arrangements. When the systemic risks have changednon-systematic risk in certain non-financial variables, the system itself is powerless.Meanwhile, the lack of related to formal arrangements to stabilize risk, the systemparalysis caused huge financial risk, and even lead to social unrest.For this reason, this paper thinks that the non-formal financial is not only a usefulcomplement to the formal financial, but plays an important role promotingtremendously the development of rural and small towns and small-medium enterprises.It also calls for the legalization of the informal financial departments as soon aspossible, and will end its uncertainty allowed to get out of the development cycle andwill take part in fair, open, just competition with the formal financial among them toparticipate in global financial integration.