A Study On The Influence Informal Finance Exerts On Macro-Economy

Informal finance has given great support to small and medium enterprises’finance as a supplement part to the formal finance section in China. It boosts thefinance market in China in the certain degree. This dissertation analyses the influenceof the exist of informal finance upon the macro-economy from theoretical andempirical aspects, being illustrated by the case of Zhengjiang province where smalland medium enterprises assembles.Firstly, the dissertation explains why informal finance emerges and develops inChina: informal finance agencies are the outcome of induced institution change and itis born to have comparative advantage on information collection.Secondly, the dissertation analyses the current situation and characteristic of informalfinance in China, listing both the favorable and unfavorable of it: the informal financecould benefit private economy, improve the finance market’s competition degree aswell as push the revolution of formal finance agencies forward. Meanwhile, it blocksgovernment to implement macro control. In the empirical part, the dissertation works out the scale of informal finance ofZhejiang whole province and individual municipalities respectively from1990to2010with modified θ method. The results show that the scale of informal finance ishuge and it is influenced by the government’s rate. After taking the scale intoregression with the product of primary, secondary and tertiary, we find that the scaleof informal finance grows1%could consequencely boost0.08%growth of GDP. Inparticular, informal finance could boost the secondary industry’s growth but impedethe tertiary industry’s. To the primary industry, the informal finance statistically haslittle correlated influence upon it.The opinion of the dissertation is that, informal finance should not be eliminated.The government should admit it as a legal section and support its development.Meanwhile, the formal finance agencies should push its revolution forward by settingup new department aiming at finance service provided to small and mediumenterprises. Carry out supplement measures to protect economy from the harmfulinfluence caused by informal finance adjustment.