Informal Finance in China: American and Chinese Perspectives

Informal Finance in China: American and Chinese Perspectives

Informal Finance in China: American and Chinese Perspectives

Informal Finance in China: American and Chinese Perspectives

Synopsis

Informal finance consists of nonbank financing activities, whether conducted through family and friends, local money houses, or other types of financial associations. It has provided much-needed financing to small and medium enterprises (SMEs) in particular, in the face of a tightly constrained and overburdened formal banking system. Unable to obtain a bank loan, firms have relied upon individuals and informal organizations outside of the banking system to obtain financing for their ventures or working capital (operating funds). Presently there is a scarcity of information on informal finance in China and it is expected to have a significant impact upon GDP and money supply. This book, with contributions from leading scholars, describes the evolution, characteristics, and variation of informal finance in China from American and Chinese perspectives. Literature by Jiang Shuxia, Jiang Xuzhao, and Li Jianjun has heretofore been available only in Chinese, while work by Kellee Tsai, Jianwen Liao, Harold Welsch, David Pistrui, and Sara Hsu has been available in English. For the first time, they come together to discuss informal financing and its many aspects. Most of the essays are based upon original survey research conducted locally, as this type of data is not normally collected by the government. The papers pioneer the description and analysis of the nuances of informal finance from several perspectives; the authors look at the social, cultural, political, and economic causes of informal finance, its many variations, and its economic, personal, and political ramifications.

Excerpt

In December 2005, Dong Tao, the chief Asia economist of Credit Suisse First Boston, called me to let me know that an American scholar named Sara Hsu would come to Beijing to talk to me about informal finance. At the time, many foreign writers and scholars would come to my school to discuss Chinese informal finance and to interview me as I had just completed a research project on the scale and impact of underground finance in China and had published some papers on this topic. I agreed to meet Sara Hsu on December 29, 2005.

That morning, Sara came to my office and asked me several questions about my research and told me that she was doing her PhD dissertation on Chinese Small and Medium Enterprise (SME) financing. She wanted to do a survey and fieldwork in Nanjing and Shanghai. I was to perform the second national survey on informal finance from January through March 2006, so we exchanged questionnaires. Her survey questionnaire left a deep impression on me and finally, we decided to do a joint investigation.

Since then, we began to collaborate, and Sara introduced me to Professor Kellee Tsai, who is an American pioneer and a scholar in informal finance. I wanted to study abroad in order to learn international academic methodology. From September 2006 to September 2007, I did research on informal finance as a visiting scholar at Johns Hopkins University under Professor Tsai’s supervision. Shortly after I arrived in the United States, Sara earned her PhD and came up with the idea of publishing a book of essays about informal finance in China, since she had contacted several Chinese and American scholars in this field as she worked on her dissertation. She suggested that . . .

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