Wenzhou, late in 2011, made a proposal to the provincial government to commence regulating private financing. The cities hopes to become the leader in China in private capital financing.
The Wenzhou government intends to create private banking and financing institutions including private capital management, micro-finance and private equity distribution centers.
The city was motivated to reestablish itself, after numerous debtors have turned to an underground market for financing to solve short-term liquidity issues caused by the world financial crisis.
The city, however, may be a role model for the country. The underground financing market is well-known. The market has prospered because of the inability of these type lenders to gain business licenses. A more liberal approach to these lending sources could increase transparency and act as a catalyst for the creation, in China, of more legal and transparent lending sources for SMEs.
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