Advantageous financial lending in China

The recent trend in lending market in China is towards legalization of private lending. Thus private lending may soon turn out to be the advantageous lending in China. The trend is quite imminent from the fact that there is a cognizable move towards regulation of private lending and its recognition by fresh legislation.

To quote Liu Ping, Vice Director of People’s Bank of China, they are already preparing draft bills to give legal recognition to such private lending in the country. The bill is reportedly submitted to the State Council for their approval.

Real objective of the new lending policy of China is helping the small and marginal enterprises. These enterprises are hard pressed in getting adequate financial support from the state owned commercial banks. Moreover the stringent terms and conditions attached to such loans are never going to be among the advantageous lending in China. They find it extremely difficult to cope with the requirements and even when they are able to avail any such loan, the interest and other payables could be well beyond their affordability.

New policy is also welcome in view of the fact that most of the commercial banks across the country are facing huge financial crisis in the wake of the global recession. In result the underground banks, mostly private money lenders have come to play and they are now lending people left and right.

However, many of them are not as righteous as they claim to be and the only intention behind their funding the small and marginal enterprises seems to be exploiting. Therefore the financial law makers in the country took up the task of introducing the advantageous lending or voordelig lenen in China. In fact the authorities have come to recognize the fact that these alternative funding sources are the only one that could really come to the rescue of the businessmen at real times where the commercial banks fail to support.

Obviously in the financial market the inactive attitude and failure on the part of the commercial banks have left out a huge gap. This gap is filled upon by the commercial pawn shops and profit guarantee providers. There are also unauthorized money lenders who demand exorbitant interests from the clients. Such underground banks in China are not new introduction.

 They have been around for quite some time now. On the other hand the large credit market has been virtually monopolized by the banks. To quote Liu again “the new law hopefully breaks their monopoly by allowing qualified lenders to make loans including Persoonlijke lening making it easier for small business who seek fund”. The aim therefore of the new law is to make advantageous lending in China the norm rather than the exception.

That is why the draft bill now introduced in China provides that the businesses or individual lenders can register as the private money lenders in the country. However, they cannot take in deposits like the banks. The bill also makes provision to cap the interest rate to a maximum of four times the basic rates. That will be an effective bar for imposing the 200% to 300% interest imposed by underground banks on hapless borrowers. Of course, the trend is clearly towards setting up of an advantageous lending in China.