Non-bank Financial Institutions Promote Micro and Small Financial Innovation in Luqiao

Wen Xiao, Jiadong Pan and Wenwu Xie
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Wen Xiao: Zhejiang University
Jiadong Pan: Zhejiang Institution of Administration
Wenwu Xie: Zhejiang University

Chapter Chapter 6 in Microfinance and China's Regional Development, 2023, pp 167-186 from Springer

Abstract: Abstract Because of their credit creation function and great influence on the fluctuation of the financial and economic situation, banks are strictly controlled by the government and often become the main adjustment object when the central bank implements monetary policy. By contrast, the activities of non-bank financial institutions are less regulated by the government because they are not directly linked to the increase or decrease of the money supply. Under the current monetary tightening policy implemented by the Chinese government, the total amount of bank credit has become the main control object of the government while non-bank financial institutions have less loan constraints, we can change the structure of social funds through professional investment, and lead the idle funds to the SMEs with the most urgent demand for funds. This not only solves the problem of fund shortage of SMEs, but also maximizes the income of investors; it does not violate the keynote of the current tight monetary policy. Therefore, under the condition of tight monetary policy, non-bank financial institutions can take on the responsibility of financing SMEs. The development of China’s non-bank financial institutions is relatively backward, and it was not until 1979 that there was rapid development. According to the latest data released by the People’s Bank of China, the loan market share of non-bank financial institutions in China is very low, accounting for less than 7% of the total loans. Non-bank financial institutions in China are still at a low level of development, and corporate loans are mainly monopolized by banks.

Date: 2023
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DOI: 10.1007/978-981-99-1960-4_6

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