Private Financial System Analysis

The paper deals with the topic of China's nongovernmental finance. By reviewing the current situation of nongovernmental finance of China, The paper tries to use the Theory of Institutional Economics and the Theory of Property Rights to explain and dig up the intrinsic reasons as well as the intrinsic rules of the development of nongovernmental finance. The purpose of the paper is to find out the theoretic and practical measures to lead the development of nongovernmental finance more systematically and institutionally rather than strike it blindly.1. Basic ideas and summaryAfter 20 yeas' innovation and development, the nongovernmental economic section has contributes more and more to China's national economy and even has become the supportive element of China's fast growth of economy. But the nongovernmental economic section can hardly get the financial support from the state finance system. This problem has blocked the way of the nongovernmental economy section's development. How to solve this problem? The topic of nongovernmental finance then comes into the author's consideration.With a historical and logical view, China's government has always controlled the financial system and financial market very tightly. On one hand, to restrict the development of nongovernmental financial section, including the monopoly of banking industry by state-owned banks and the restriction of nongovernmental economy from financing through stock market; on the other hand, to restrain the nongovernmental economic section from getting capital from state-owned finance system. The reason is that, the government has to obtain enough savings to sustain the stability of the state's economy and society. In such situation, the nongovernmental finance cannot acquire the encouragement and acknowledgement from China's government, which has a very bad effect on China's economy.In this thesis, the author probes into the reason why after so much oppression, the nongovernmental finance can still survive .From the point of Theory of Institutional Economics, the development of the nongovernmental finance can be explained by the theory of "Path-Dependence" and "Lock-in" .Indeed, Nongovernmental finance is a kind of financial innovation. It develops spontaneously and it belongs to an inductive evolution. But once it came to being, it would lock itself in a state of low-efficiency. So when nongovernmental finance cannot debouch such a state by itself, the government should force the nongovernmental finance to grow into an efficient institution by creating some kind of institutional circumstance.In this course, in order to guarantee the efficiency of the institution of nongovernmental finance, we must develop a transverse credit system, which is endocentric of nongovernmental finance. Furthermore, in order to develop a transverse credit system, there must be an efficient Property Rights institution of nongovernmental finance. The thesis also emphasizes that in China, an efficient Property Rights institution depends more on the efficiency of law enforcement.Finally, the institutional analysis of nongovernmental finance has to be carried out in nongovernmental financial organization particularly, so the thesis discourses upon the status of nongovernmental banks. The birth of the nongovernmental banks is deemed to be a form of financial innovation. It also has caused many controversial disputes. Through the analysis of these disputes, we can find out the practical difficulty of the nongovernmental finance. But if we can positively treat the relationship of financial innovation and financial institution, we can evidently realize that the development of nongovernmental banks is the natural outcome of the development of financial institution. In the end, the innovation of financial institution featured by the nongovernmental banks will ultimately deepen down along with the maturity of the financial environment.2. The Academic Probing and InnovationsIn order to research the problem completely and s...