Financial Suggestion for

Chinese Government

Shiyi, Ren 250709671Yue, Wu 250764816Zhihua, Dai 25070901Ruihan, Liang 250765431

Suggestion about Chinese Official Finance Market Management

Accroding to the situation between China, Japan

Policy differences :The Japanese government(Cabinet Office) control three ministries(Troika),which control and decide how much loan should be given to which company, and giv

en by which bank.

通产省（Ministry of Economy, Trade and Industry

大藏省 (Ministry of Finance)

Economic Planning Agency(EPA)

merge in 2001

1.Janpanses Banking System(Financial Institutions)

China and Janpan Official Finance Market

1. The central bank as the core banking system(Main part in China)

2.Serval parts and kinds of banks take part in Finance Market(Main part in Japan)

The differences between China and Japan

• 2.Chinese Official Banking System（制度）

Market Share of Bank

What are the differences?

• 1.Japan: One company can only get loan from one single Financial Institutions (which is decided by MIETI and MIF) to make sure governemnt can monitor the situation

• 2 China: Do not care about the profit, they only make loan to those companies which need it, base on social, weafare situation of society

Underground Finance Market“ 地下钱庄”

Illegal

Origin• Time: Ming dynasty (1628—1643) “ 钱桌”

1980s (“ 改革开放” ) -- prosperous

• Places: - Coastal region

- Advanced private economy (Wenzhou, Taiwan, HK, Guangdong,

Zhejiang, Yiwu)

- Inland area

• Motivation: next page

Contradictions

• Limited currency Massive demand

• Tedious loan procedure Immediate needs

What does it do?“ 庶民金融”

• Usury (loan shark) “高利贷”

• Intimidation• Money laundering (corruption)

• Deposit taking

• Debit & Credit

• Foreign exchange trading

• Funds raising

• others

Involvers• Government officials

• Overseas labors

• Small-size investors

• Illegal immigrants

• others

Impacts

• Cons:Monetary policy interference illegal activities inducement

• Pros： information collection at a low price (efficient) Transform savings into investment

Wenzhou Cigarette Lighters:

• 45.3 million 126.5%

• 31.83 million USD 171.1%

• 550 million 80%

The Reasonability & Danger of Underground Banking

Existence

---Reflection of a Private Entrepreneurs Fall

Jin Libin Tragedy

• Huilong Group was founded in 1992, Huilong Group's assets over 25 million yuan, with nearly 2,000 employees.

Jin Libin Tragedy

• April 13, 2011, after Jin Libin’s self-immolation, the behind folk huge debt up to 1.237 billion yuan surfaced.

Jin Libin Tragedy

• Huilong group’s total lending was1.46 billion yuan

financial institutions - 1.1 million yuan private high interest financing -1.35 billion yuan

• Interest Rate: 24% to 36% interest per annual • Interest: at least 400 million yuan a year

The Tragedy is not just Jin Libin

• “The loan is too large to repay, so Fuhe bean industry is a tragedy, I will burn myself ”

The Reasonability of Existence

• Small and medium size businesses hard to get loan

However, Chinese small to medium sized businesses make up 70% of employment on the mainland, and about 60% of the country's GDP.

The Reasonability of Existence

• The shortage of overseas remittance arrangements

• To protect assets from theft or seizure by government

• It permits evasion of stringent import/export duties;

• It permits evasion of exchange control regulations;

• It facilitates evasion of tax;

Suggestion for Chinese Finance Market

Legalize Underground Bank

Japan's Main Bank System

Suggestions for Chinese Finance Market

Interest Rates Iberalization

Set up Private Banks

Reform the State Owned Commercial Bank

References

• http://www.aclaedu.cn/newModule/discuss.php?forum=rd_default&post_id=120440&MoodleSession=ee17192bdea362a2e5ddddcc2a87ff8e

• http://www.people.com.cn/GB/paper2086/9589/885574.html

• http://news.xinhuanet.com/legal/2014-02/27/c_119520740.htm

• http://m.secretchina.com/node/471691

• http://article.chinalawinfo.com/Article_Detail.asp?ArticleId=32330

• http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20120122000055&cid=1502

• http://www.wenzhouguide.com/news/export-of-wenzhou-lighters-to-japan-gains-recovery.html

• http://blogs.reuters.com/financial-regulatory-forum/2012/02/08/china-shadow-banking-dancing-in-the-dark/

• http://www.thedailybeast.com/articles/2014/02/26/inside-china-s-underground-black-market-banks.html

THANK YOU !!!