A Study On Informal Credit Of Wenzhou City Based On Wenzhou Index

The private sector-led economy in Wenzhou has obtained an unprecedenteddevelopment since the great reform and opening-up. Meanwhile, Wenzhou is known asthe “Wenzhou Model” throughout the world. However, the conflict between the rollingup of demand for capital and a shortage of formal financial capital supply has been along-standing problem. Thus, as a supplement to the formal finance, informal credit gotrapid development, which greatly alleviated the conflict between capital supply anddemand, and played an indispensable role in the development of Wenzhou economy.However, due to the unsound organization system, high risk and lack of governmentregulation, the informal credit caused some negative effect to the development ofWenzhou economy. Under the background of financial reform in Wenzhou, we need toconduct a comprehensive research in the informal credit in Wenzhou, and promote thebenign of informal credit.First of all, on the basis of existing research results, this paper analyzed thedevelopment of Wenzhou informal credit under the background of national economy,and discussed the current situation, economic effect and existing problems of informalcredit based on the theory of financial repression and financial deepening, and theasymmetric information theory.Secondly, based on the monitoring data of Wenzhou branch of the People’s Bank ofChina, this paper demonstrated the impact of informal credit on the economicdevelopment of Wenzhou via a cointegration test on informal credit and economicgrowth. Meanwhile, we explored the generating mechanism of Wenzhou Index,established a regression model and defined the "safety threshold", thus to provide anearly warning of credit risk.Finally, this paper put forward the countermeasures to promote the development ofWenzhou informal credit in five aspects as policy, institutional guarantee, risk control,credit construction and market development.