Study On China's Informal Finance

Informal finance refers to various kinds of investment and fund debt-credit activities not supervised by the government. According to Chinese reality, informal finance has become an important supplement of formal finance, and played a significant role in alleviating mall and medium-sized enterprises' financing problem, supporting the development of local economy, promoting financial system efficiency, perfecting local credit system, etc.Since reform and opening up, China's economic system has undergone changes, from a planned economy to a market economy, which is a changing course of China's economic structure. With the deepening marketization, China's economic structure has undergone tremendous changes, the non-public economy has become an important component of the national economy in China. But in the process of the economic system changing, the financial system is lagged behind changes in the economic structure, the government, for their own interests, still dominates the financial resources and only provides financial supply to state-owned enterprises and large enterprises. Because the private economy developed from Marketization process can not get effective developing financial supply from the formal financial department, civil finance appears which can fulfill funds needing of private economy.For a long time, civil financial was treated as underground financial by government and always attempt to use administrative means to resolve civil financial issues, but practice proved it to be unsuccessful and many problems still exist. According to the central bank survey of civil financing projections, there are about 950 billion yuan, around 6.96% of GDP, accounting for about 5.92% of the home and foreign currency loans. Such a large-scale funds outside the circle of formal financial funds means a large financial risks and China's financial industry had opened to the world at the end of 2006. In this background, to maintain our normal financial order, prevent and defuse financial risks, safeguard financial security, enhance the competitive strength of our financial industry, we must take steps to make the large civil financial funds more standardizing and consolidating. At the same time, there is a very important practical question: our economy is in the transition period from planned economic to market and the whole community economy appears an obvious duality, Urban and rural economic and financial development is uneven, Various forms of ownership, diversified management forms, multi-level companies co-existed in our business and will exist for a long time, The large number of SMEs and the wide distribution of rural farmers with their own weaknesses can not get capital help from formal financial sector to meet the huge demand for funds, they are all the driving force behind the development of civil financial. It means that our civil finance will be perpetuated as an integral part of our financial structure.Therefore, this article first introduces the concept of informal finance, and points out the effect of informal finance in changing our country's monetary system, and the n considering current developing situation of informal finance in our country, taking Xu Zhou for an example, points out the problems of our country's informal finance development. At last, this article proposes the concrete measures for standardizing our informal finance's development.