Research On The Emergence And Development Of China's Private Finance

The phenomenon of private finance can be interpreted simply as the private financial intermediaries'activities. Financial intermediaries and their activities are not only an important part of the whole financial system, but also developed together with the economic development and satisfy the fund demands and other financial services in the economic activities. Marx once said, money is the lubricant of economy. If we extend this in a broader sense, it can be said that all the financial activities are the lubricant of economy. Specifically speaking, the role of finance in economy includes: (1) accumulating social financial resources; (2) diversifying risk; (3) reducing transaction cost; (4) price discovery; (5) providing the payment mechanism; (6) improving resources allocation.The presence of the above roles of finance in economy requires that the financial system and financial market should be healthy and efficient. While efficient financial system and financial market should be the multidimensional, perfect and competitive, which is coordinated with the economic agents. It should not exclude the reasonable institutions which exist together with economy, such as private finance. At present, in China's financial system, private finance doesn't have a legal identity and position, but it doesn't mean that there is no private finance. On the contrary, the more strictly prohibited and precluded private finance is, the more active it is. Though the government has stroked and rearranged the underground finance (private finance), the latter hasn't disappeared, and it exists and functions in a more hidden way. This thesis will study and analyze the private finance in these circumstances.This thesis is composed of five chapters. The first chapter is the introduction. In this part, the problem of private finance will be introduced. We will define and categorize the private finance and introduce some researches concerning the private finance both domestic and abroad. In this thesis, private finance will be defined as informal financial activities, which is different from the formal finance in supervision manners, business characteristics, financing circumstances, interest rate level, budget constraint, customers groups, etc. The second chapter is on the forming mechanism of private finance. In the present economic, policy and cultural environment in China, due to the imperfectness of the monetary policy transmission mechanism, the fund demand is very large while the supply is inadequate, which has led to a large gap between the demand and supply. As an institutional arrangement, private finance has appeared and become the indispensable component of the existent financial system. The third chapter is on the economic efficiency of the private finance. Economic efficiency is a very important standard measuring the value of economic phenomena. First, though sometimes, the interest rate in the private financial service is much higher than that of the formal financial activities, it is still reasonable and highly efficient, which will have a certain impact on the market of private funds and national economy. Second, with the entry of private finance into the financial system, there will be the"catfish effect", so the efficiency of the financial system can be increased. Third, private finance allocates the resources through the market, so to improve the resources allocation manner and promote the economic growth forcefully. The positive effect of the private finance is obvious. Certainly, it has some unavoidable shortcomings, such as the difficulties in the government management, the possibility of being exploited for some illegal purposes and even crime, and the weakness in risk resistance because of the restrictions in scale. The fourth chapter is on the suggestions of how to regulate and develop the private finance. On the basis of the cross-country and cross-regional comparison of the private finance, the private finance has been reassessed and repositioned: private finance is a kind of endogenous institutional arrangement in China's market-oriented reform, and it is an indispensable part for the development and perfecting China's financial system. It has been emphasized too that to avoid the disadvantages and exploit the advantages, the government should shoulder its responsibilities and the private financial institutes should perfect themselves, so to make the private finance play a positive role in the economy as much as possible. The last chapter is the summary.