Study On The Legalization Of Informal Financial Supervision In China

With the process of China’s reform and opening up, the financial industry followed in a continuous exploration and gradually perfect the process. The whole economic system is dependent upon finance in the contemporary world. Finance plays a guiding role not only for the reasonable flow of funds, but also for optimizing the allocation of resources. In addition, finance is an important guarantee in promoting the steady development of the entity economy. Under such a circumstance, Chinese financial industry facing the guidance and supervision problem in financial market,though it is in a process of continuous innovation. However, the financial supervision is like a double-edged sword; when it is appropriately used, it brings positive effects to the financial market, and also provides a safety and effective operation environment to the national financial system.Conversely, it courses an imbalance between financial innovation and financial supervision, and new financial risk will inevitably come out.The informal finance plays an increasing role in the financial market, it is an urgent need to improve the ways of supervision in the whole financial supervision market. I started this paper by an illegal fund-raise case, which revealed many regulatory issues and judicial controversies in informal finance system as stated in this paper. First I analysis the problems facing in the informal financial supervision in China, and then learn from international supervision mode,to establish a suitable supervision model and supervision system, combined with China’s national conditions, so that to make the informal finance industry gradually standardized and healthy development in our country.Firstly, the starting point of this paper is "Wu Ying’s case". Under the social background and legal background of this social phenomenon, there are many problems existing in financial supervision field especially in informal financial field.Secondly, according to the analysis of the above question, I had a brief historical retrospect in financial supervision development system, then cleared up the problems while in the future development. These problems include:the informal financial management lack of legal basis; the business development is speculative and regional limitations; to a certain extent, the normal financial and economic running system would be disrupted; it is difficult for the state’macro-regulation; the disorder in informal finance may result a negative impact on formal finance. At the same time, the article points out financial regulation and supervision defects, including lack of laws and regulations which confirm informal finance as a legal status; the lack of corresponding organization setups, and the lack of corresponding risk aversion and security system, the lack of the corresponding supervision and management system.Again, this part is an analysis of the informal financial supervision system, which is based on the jurisprudence principles. From the public law mode and private law mode in financial supervision, then points out the limitations of public supervision law mode, the next step, analyzes the trend of financial supervision from public law to private law mode. At present, there appeared the privatization of public law phenomenon for strengthening legal supervision. The reasons resulted the formation of this trend including:the intrinsic defects in rational and the needs of law enforcement level in a country. The fuzzy and conflict of public law value and the contrast between public rights protector and private law protector.Finally, the last part of this paper puts forward ways of developing informal financial in our country, and regulation the running mechanism of informal finance in the market. Informal finance is an important part to the whole financial system, and the supervision is the important guarantee of the normal and stable operation in financial system. Therefore, this part firstly analysis the supervision model in china, then find a suitable model through the different supervision mode. As the regional characteristics and the urban and rural structure in china, it is difficult for the fully development of informal finance if supervised only by government regulation or only by self-regulation. Therefor, regulation from various aspects is essential for the informal financial market, which can be specific by differentiated treatment and diversified supervision. Measures should be taken to improve the regulatory power in informal financial market. In this paper,the measures can be classified by different subjects participated in the whole financial market, such as government, enterprises, social organization. Therefore, great efforts shall be made to first constantly improve financial supervision system, legal system, and internal control system in financial institutions; and to strengthen the construction of financial associations so as to bring the supervision mechanism into full play.