Wenzhou opens new center for financing
Updated: 2012-04-27 10:05
By Gao Changxin (China Daily)
A center that will monitor and act as a clearinghouse for private lending opened in Wenzhou, Zhejiang province, on Thursday under a 12-point pilot plan to reform the city's financial industry.
The center is intended to bring Wenzhou's huge, unquantified "shadow banking" system into the light of day. It has 6 million yuan ($952,000) in registered capital and 22 investors, both individuals and institutions.
It will gather, process and disseminate private lending-related information, register private loans and provide credit ratings.
The entity, to be supervised by Wenzhou's financial regulators, rents office space to private lenders. So far, seven institutions have leased space.
The center requires borrowers and lenders to submit bank transfer receipts and contracts after a loan deal is conducted through the center.
"Existence of the center will make private lending traceable and prevent a build-up of risks," said Zhou Dewen, chairman of the Wenzhou Small and Medium-sized Enterprises Development Association.
There is no authoritative figure for the scale of private lending in Wenzhou because everything's done underground, Zhou said.
Putting private lending activities above ground, he added, will avoid a repeat of last year's situation, where entrepreneurs fled after being unable or unwilling to repay debt bearing usurious rates of up to 90 percent.
Many entrepreneurs in Wenzhou turned to private lending last year when State-owned banks cut loans to small and medium-sized enterprises amid credit-tightening measures by the central bank.
The founding of the center was one of the 12 measures promised in a central government decision earlier this year to make Wenzhou, China's private capital powerhouse, a "pilot zone" for a series of financial reforms.
The reforms also include allowing residents of the coastal city to invest privately overseas and set up loan companies.
Also on Thursday, the government of Wenzhou released a detailed plan on implementing the pilot.
The city will set up a finance supervision bureau. It will draw up supervision plans and crack down on irregularities in the city's financial industry.
The plan calls for Wenzhou to have at least 30 rural financial institutions and 100 micro-credit companies with 40 billion yuan in net assets by the end of 2013. This year alone, the city is to add 30 micro-credit companies.