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Private lending crisis financial system highlighted three issues

(A) of State-owned commercial banks-the indirect financing system is not conducive to SME financing and financial resource allocation
of State-owned commercial banks-the indirect financing system in the high proportion of financing structure in China is in our economy's long-term problems. Despite the reform and development of the capital market, but the problem has not been fundamentally changed. Current assets of large State-owned commercial banks and credit took advantage. This financial system produces the following drawbacks:
small and medium enterprises in the most vulnerable position in the whole economic system. Banks and enterprises, the State-owned commercial bank and small Bank and relationship between large enterprises and small businesses, which are in a dominant position. The preferred target for State-owned commercial banks are State-owned enterprises, and less willingness to lend to small businesses. First, the higher cost of loans to SMEs because small loan size, but to approve the fix. Second, small businesses have a higher risk because of their vulnerability. Studies have shown that size was positively correlated with the size of its services business. Big banks to lend to SMEs was lack of will or lack of product design.
a strong market position give commercial banks more pricing power. Spreads on stable revenues, commercial banks may also charge exorbitant fees and Commission income. Currently under the dual pressures of rising costs and complex external environment, increased difficulties in the real economy, financial institutions, high pricing power, squeeze profits in the real economy, especially SMEs profit margins. First three quarters of 2011, commercial bank's cumulative net profit of 817.3 billion yuan. Sum of central revenues for January-November was 831.8 billion yuan. Five State-owned commercial bank's net profit in the same period accounted for all net profits of commercial bank 66%. In the condition of high funding costs, SMEs seeking higher returns on investment projects, rather than the profit margins of manufacturing, created a short-term action, hollow in the real economy.
of direct financing and indirect financing system occupy market space. Banks and funds, private equity firms and other financial institutions dominate business. Large State-owned banks nationwide physical outlets and basis for areas such as inside and outside the settlement, clearing and custody services, and firmly grasp the initiative in direct financing market. 2010 bond and equity financing accounted for less than 15% social financing, while the United States bond market financing social financing than in the same period was 38%. In addition, the State-owned bank financing through the stock market, growing their own, but share prices slump dragged down the secondary market for a long time. Slow development of direct financing market, affecting the financing capabilities of SMEs through direct market.
(b) private capital cannot come into the mainstream financial system, dual system
large-scale private capital to enter the mainstream financial system. Launch of Chinese financial institutions and the establishment of strict controls, although the banking regulator encourages private capital and foreign ownership of existing commercial banks, such as the September 2010 to publish relevant measures to encourage private capital reorganization of high risks of rural credit cooperatives, but requires a single Corporation and its affiliates share cannot exceed 20%. Role of private capital in the grass-roots financial system have limited space, such as rural Bank sponsors must be financial institutions, microfinance companies can only lend not get fed, as financial institutions to sustainable development. Trillions of private capital can only be non-formal financial operations.
flow of private capital and difficult to monitor. Free private capital outside the formal financial system, part of mainstream financial institutions meet the normal lending requirements cannot be met, a useful complement to the formal financial, in part through financial maneuvers to reap high interest income, are involved in illegal financing and capital flow to the lucrative industry such as mining and gambling and other illegal industry. Private capital to make supervision difficult to effectively cover, risk prevention and control mechanism is difficult to establish.
private capital accumulation of financial risk, threaten the entire financial system and the real economy. Wenzhou's folk finance event indicates that the usury in the private financing, business owners get into mediation phenomena such as illegal Range Rover to save once the financing chain, it will affect the economy and social stability. Part of the underground to help money-laundering, the Central Bank report on the anti-money-laundering displayed, each year through underground banks in the Mainland washed out money laundering of more than 200 billion yuan. Some underground illegal trading of foreign currencies impact countries normal financial order.
(c) market-oriented reform of interest rates lag, financial resource allocation distortion
financing and disorderly development entangled in private lending has led to the occurrence and spread of the credit crisis. Trace, dual credit interest rate controls the formation of interest rates is development imbalances lead to borrowing the main cause of the crisis in the financial markets. Delay of financial market reform, has become the obstacle to economic development.
credit interest rate controls are the root of the system partition. The formal financial, corporate bonds, financial bonds, commercial paper money market transactions and market pricing have all foreign currency deposit and loan interest rates have also been left entirely to the market, only deposit and lending area "maximum loan limits, deposit" of the interest rate. In the credit markets, banks ' lending and deposit interest rate and lending interest rate is seriously out of, small and medium enterprises from the State-owned commercial bank lending interest rate is 7%-8%, annual interest rate is the cost of 12% from joint-stock Bank financing, private capital borrowing costs as high as 24% per annum-30%. Two types of interest rates caused by dual institutional segmentation of financial markets.
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