Financial China

Informal lending takes off, regulation proposed

  • Published 04 Mar 2010

A surge in informal lending rates raises concerns in Beijing, which renews its desire to regulate the freewheeling sector.

Sky-high interest ratesThe pressures of running a tightly controlled banking system in a largely liberalised economy are nowhere clearer than within China's underground financial system. The rules of the game here are simple; when curbs on official bank lending tighten, the returns to be had from unofficial, or informal, lending shoot upward. This is happening now – creating risk for borrowers and a renewed desire by authorities to regulate the netherworld of illegal finance.

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