The Regulation Of Private Lending In China

Generally, parties of Private Lending are borrowers and lenders, the former onesare often small and micro enterprises or their owners, who have difficulty in financingfrom formal financial institutions; and the latter ones are often natural persons ornon-financial institutions, including enterprises or other organizations. The relationshipbetween borrowers and lenders are lending relationship. The problems of PrivateLending are not on account of unclear legal relationship, but the significant affect on thewhole economic society when a large amount of Private Lendings accumulated.Therefore, economic law issues play an important role on Private Lending. This paperjust hopes to step into this area from an angle of economic law, and investigate theconcept of the regulation of Private Lending, in order to make the area of regulation onPrivate Lending clear，and help choose a considerable path for the regulation on PrivateLending, contributing to the current situation that small and micro corporations canhardly get finance.The first chapter of this paper focuses on the basic instances about Private Lending.Starting from the notion of Private Lending, it works out that the trade subjects, thetrade tool, and the trade place as well as whether being regulated by governments are alldifferent from that of former finance. Therefore, this part concludes the basic forms ofPrivate Lending at present. First, the direct Private Lending in disperse type; second, thedirect Private Lending in concentrative type; third, the type through financialinstitutions or organizations, which mainly means the Small Amount Loans, as well asother types through pawn brokers and consigners, etc, besides, other types of PrivateLending, which exist in many types of kinds including Hui and underground banks;these other types are constitutionally that the subjects who need finance get loan frommore than one person. In addition, Private Lending contributes a lot to the currentsituation that small and micro corporations can hardly get finance, which is a typicalcharacteristic of Private Lending. Therefore, its regulation should take this characteristicinto account and design the system reasonably.The second chapter investigates the current situation about Private Lending,depending on which analyzes the problems caused by Private Lending. In legal research,the current situations consist of two sides, the one about the legal system and the other one about the reality. As to the former one, this part focuses on the legislature on PrivateLending. After investigating all kinds of Chinese legislature, both central and regional,which include the restrictions on the subjects, rates and range of Private Lending, wecan find that the current legislature on Private Lending is scatted and oversimplified. Asa result, in the environment that the legislature and the practice of Private Lending couldnot match, a large amount of problems emerged, including that, first, borrowers have therisk to make the actions of illegal fund-raising and the ones of illegal loans betweenenterprises; second, the finance safety of investors cannot be guaranteed; third, thechaos of supervisors leads to the coexistence of regulatory vacuum and overlap. Afterinvestigating the regulatory current situation and problems, we could considerablyarrive at the conclusion that the current concept of Private Lending is considering theadministrative controlling as mainly and penalty the supplement, which doesn’t focuson the risk controlling, leading to the absence of the regulatory system of PrivateLending.Then, after the analysis of problems in the first two chapters, the latter part of thispaper will make a contribution on the answer of these questions. The third chapteranswers the question of how to reconstruct the concept of the regulation of PrivateLending. In fact, the first two chapters have answered where the problem exists; thethird one will mainly answer how to solve the problem in the theoretic angle. First, inorder to reconstruct the concept of the regulation of Private Lending, the foundation ofthe concept roots should be cleared.Generally speaking, the regulation of Private Lending needs to follow theprinciples of standardization, to be brought into public and to be brought intocompetition. Folk Credit is a complex market, and its regulation cannot follow theroutine of the overall supervision of the government, but to follow the originalcharacteristics of Private Lending. What we need to do is, in the regulation on privatelending division of reasonable boundaries，we should make it a market of multi-level, oflimited degree and in a reasonable regulation, finally reach a multi-level market.