Normalization Of Informal Finance

In ancient China, the private financial has existed, such as banks, chant, providing financing services for the development of non-governmental economic organization. Since the founding of New China, the Chinese government has taken a strict policy of "financial repression", and private financial has been excluded outside the formal financial system. However, there is serious problem of uneven distribution of the formal financial resources resulting difficult for China’s small and medium enterprises to obtain financing support through formal financial channels. Under the role of market supply and demand, private financial markets have sprung up.SME play an important role in the national economic development process. It can be directly related to the prosperity and stability of the national economy and development. However, after35years of reform and opening, financing of SME not only failed to be resolved, but showing a worsening trend. In order to ease the financing difficulties of SME, it is necessary to take advantage of private finance to expand the financing channels for SME. This paper not only fully analyzes the intrinsic link between financing needs of SME and private capital but also focuses on the specific mode of the private capital investment in SME financing and provides some recommendations for private financing of SME.This paper is divided into five parts. Chapter one is the introduction of background and significance of the study, research ideas and methods. Chapter two focus on theoretical analysis of SME financing and private financial. Chapter three is about empirical analysis of SME financing and private financial problems. Chapter four mainly states the model and experience of SME financing and private financial in United States, Japan and other foreign countries. Chapter five offers some suggestions about standardization of private financial channels as well as establishing and improving financing system for SME.