Contract Enforcement Mechanism And Private Financial Risk

Since the reforming and opening up, China has entered the stage of rapid development. Ranked in the forefront all over the country, Zhejiang. achieved fruitful results in the private economy and regional financial field, becoming one of the first into a well-off society area in China. However, in the process of reform and development, a lot of potential problems about private financial risk surfaced. In recent years, many Zhejiang private entrepreneurs involved in lending crisis, or even a "run away" event. Among them the Wu Ying case attracted the most widely attention.This paper uses the historical comparative institutional analysis and chooses domestic private finance crisis background, mechanism research, case as the main line to explain the influence of contract enforcement mechanism to the folk financial risks. Then, this paper will analyze the reasons of domestic private financial risk crisis in depth.Based on the economics theory, this paper introduces the folk financial repression and financial deepening theory and studies the history and reasons of contract enforcement mechanism, then has a review and evaluation on the personalization and impersonalization contracts literatures. In the part of studying contract enforcement mechanism and financial risk, this paper describes the development and current situation of Zhejiang folk finance and analyzes the positive and negative effects of the personalization transaction mechanism on private finance, including the analysis on contract enforcement mechanism work and failure. the private financial markets potential risk, folk financial activity patterns and game model. In the case study part of contract enforcement mechanism and financial risk, this paper explores the causes of outbreak of folk loan storm through overviewing the Wu Ying case and abstracting the issues concerning to economics. Then, this paper will demonstrate the distortion of the personalization contract enforcement mechanism in the traditional private lending market based on the game analysis on the failure of personalization contract enforcement mechanism. This paper believes that the current problems of private finance stem from the microscopic mechanism of contract enforcement. Therefore, solving the problems should base on the perspective of contract enforcement. This paper also believes that it needs system construction to make up the "market failure" and promote the private finance to be open and own a healthy and sustainable development. It also needs to replace the traditional personalization contract enforcement based on the geopolitical and kinship to the impersonalization based on the laws of financial market, which is the core of the system construction. Based on above conclusions, this paper will put forward some recommendations.