Non-banking loans have been developing into a comparatively
common financial activity in China over the past years, exerting a
continuously wide influence on the Chinese economy, the Economic
Information Daily reported on September 5, 2006.
Statistics from the Hefei Branch of the People’s Bank of China
(PBC) show that total volume of non-banking loan trade approached
25 billion yuan (US$3.14 billion) in central China’s Anhui Province in 2005, almost 4.1 percent of
the provincial bank savings.
Such loan trade is conducted between individuals or betwixt
enterprises and mutual aid groups. In some areas, even financing
circles, organized by villagers or privately-run enterprises
mainly, have appeared.
Qin Chuansheng, governor of PBC’s Chaohu Branch, said that
non-banking loans are currently flourishing in the countryside.
Farmers with a funds surplus think that current bank rates are too
low. If investing their savings in non-banking loans whose interest
rates are up to the lending rates of rural credit unions, they can
avoid fund risks as well as gaining comparatively significant
returns and benefits. As for farmers in need of funds, non-banking
loans offer additional advantages such as simplified procedures,
flexible time limits and mutual coordination between demanders and
suppliers.
The uses of non-banking loans have changed from meeting basic
living requirements to expanding production, investment and
consumption levels; and their time limit are moving towards being
fixed long terms, said Qin. In his province, the uses of such loans
have extended from family needs to solving the problems of local
enterprises’ production operations and investment. The non-banking
loan used in production and investment in Anhui has increased from
60 percent in 2004 to 80 percent in 2005, Qin said.
Because of the changing loan uses, loan term tends to be longer.
In 2005 the proportion of loans with their term exceeding one year
stood at 42 percent, up nearly 10 percentage points over the
previous year.
The loan forms have also changed from previous oral and written
agreements to more concrete stakes, mortgage intermediary
guarantees. Intermediaries and related organizations have
accordingly cropped up. Currently, 16 percent of Anhui’s
non-banking loan activities are conducted via intermediaries’
written guarantee; 70 percent are conducted via intermediaries’
introduction.
In some areas, brokers, an embryonic form of intermediary
institutions, have appeared providing non-banking loan services.
The frequency of related legal conflicts stand at 6.05 percent.
(China.org.cn by Li Jingrong September 10, 2006)