Small Loan Enterprises In Wenzhou Will Be Converted Into Village Banks.

China has approved a package of financial reforms in Wenzhou, a city famed for entrepreneurship and private lending, which may be a prelude to China's liberalization of the financial system across the country.

A man rode a tricycle across Wenzhou. Shoes capital The area is full of cars waiting to be processed. shoes 。 Wenzhou is famous for its large scale private enterprises. The move of the State Council of China represents an important symbolic step towards the reform of the financial system. For a long time, China's financial system has been seen as an obstacle to the establishment of a better and more sustainable growth model of the world's second largest economy.

The key test will be whether Wenzhou's reform will be promoted in other parts of China. In recent years, many other reform measures promised by the government have not been fulfilled. The tendency of over regulation of the government may suppress innovation, so that private lending, which plays an important role but has legal doubts, has been underground operation.

The State Council said in a statement that it will allow private lending institutions in Wenzhou to set up investment enterprises in accordance with the law so as to expand financing for SMEs. The legal status of private lending institutions in Wenzhou has always been on the edge.

Small and medium-sized enterprises have been complaining that China is a big state-owned company. Bank Favored by state-owned enterprises, SMEs are difficult to obtain loans. In the view of banks, the ability of state-owned enterprises to repay loans is guaranteed by a well funded Chinese government.

In addition, the State Council also said that the pilot of individual overseas direct investment in Wenzhou is being studied to provide residents with a channel to get higher returns than bank interest. The interest rates of Chinese banks are often lower than the rate of inflation. At present, China strictly restricts individual foreign direct investment.

According to the pilot scheme of Wenzhou, the total annual amount of individual overseas direct investment is not more than 200 million US dollars (a single investment is not more than 3 million US dollars). Finance Enterprise.

Wenzhou residents can also reinvest overseas profits. However, Su Xiangqing, director of the Wenzhou Municipal Bureau of foreign trade and economic cooperation, said that the State Council may also modify some of the contents during the audit process.

At the moment, the call for China's reform at home and abroad is getting higher and higher. Wen Jiabao, premier of the State Council of China, said at a news conference this month that the development of private finance is not suited to the needs of China's economic and social development.

In addition, a report jointly issued by the World Bank (WorldBank) and the Chinese government in February this year called for a reduction in the size of state-owned enterprises.

Meanwhile, Guo Shuqing, the newly appointed chairman of the securities and Futures Commission, has been seeking to be in China. equity market Extensive reform of the bond market.

An executive at a large Chinese bank said that the approval of Wenzhou's reform plan was extraordinary. At present, Chinese banks are unwilling to lend loans to SMEs, partly because banks lack professional expertise to assess risks.

Some bosses in Wenzhou welcomed this. Qu Guoning operates a small wire and cable manufacturer, and there are hundreds of such enterprises in Wenzhou. He has been struggling with the financing of the business expansion plan. He said that the normalization of private lending can help us reduce the cost of financing.

China announces the establishment of Wenzhou financial integration reform Test area. The picture shows a worker in a shoe factory in Wenzhou. Qu Guoning said he plans to expand the business to the field of home appliance manufacturing, which is more profitable but needs tens of millions of yuan in investment. He said it was difficult to borrow money from banks.

How large the scale of underground lending activities in China is still unclear.