Years of Poems and Spirits

A recent article indicates that rates among nonofficial banking outlets in WenZhou, China has lowered by 30% (温州民间利率大跌：400亿浙资撤出上海楼市)

I have been interested in alternative banking in China, knowing that the stage of economic development needs more fluid capital flow but the official banks cannot provide that. The alternative banking, I thought, would be an interesting specimen to study: in it, one could see some of the “capitalist sprouts” Chinese historians have been talking about. Also, it would be interesting to see whether it could pose a challenge to the central authority, or change social economic behaviors (e.g. civic association, credit-trust system, etc.)

At the recommendation of Christine Wong, I bought a book called Back-Alley Banking: Private Entreprenuers in China . It is an interesting book because the author did extensive field work in China (23 month). It is probably the best resource in this field. However, the author has a rather strange view point: in the introduction, she mentioned how her study could prove the institutional economy (or state-directed economy) wrong (e.g. Douglas North). But her research has not proven private banking could fund large scale capital adventures. Buying houses or coal mines, as the WenZhou capitalists have done, needs mainly financial capital. But financial capital alone is not enough to catapult a national economy to a different stratosphere, or the Saudis would have been king of the world now.

In other words, had her study been how backalley banking changed Korean economy–the one most used as an example of state-directed development, her conclusion would be much more relevant.

Now back to the recent WenZhou article. It was poorly written: full of information, little knowledge. The author did not try to speculate whether the regression was temporary or an indication of a new trend. But one interesting thing I found was:
“这些地区以个人为贷款主体的生产经营性贷款产品层出不穷 … 甚至，一些银行已着手适当简化贷款流程，或可不经贷款审批委员会审议办理某些业务，以更好地适应小企业贷款“短、频、快”的特点”

It looks like the official banking system is improving: more products, better/more efficient services. But is it because the competition or administrative directive from the central government? As Yoda said, “Hard to see.”