Abstract

The default of a large number of informal finance schemes in China has caused enormous financial losses, and therefore has potential social and political significance. Analysing 354 defaulted schemes from 1989 to 2015, this study defines how they differ from other types of informal finance. It also produces an ideal-type representation of the default process and concludes that the default results from greed, increasing financial pressure at the individual level and private enterprises’ restricted access to state bank loans at the institutional level. China’s financial system should be more flexible in order to prevent further financial losses through informal financial relations.

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Additional Information

ISSN
0219-8614
Print ISSN
0219-7472
Pages
pp. 111-135
Launched on MUSE
2017-12-22
Open Access
No
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