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Market-Based Regulatory Responses to Private Lending in China: Beyond a Law and Society Paradigm

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Abstract

Along with China’s economic downturn, there has been an increase in the size of China’s underground lending market. The mounting risk in connection with this underground lending market triggers tremendous interest and debates over appropriate and effective regulatory responses. Because of its private and non-transparent character, the underground lending market is likely to confound those seeking to find “black letter” law governing its regulatory framework. Instead of relying on its conventional tighten-up strategy—using the muscle of the Criminal Law—China has orchestrated an experiment by allowing local legislation to formalize part of the underground lending market, as well as a judicial approach by recognizing a higher interest rate charged by underground lenders to borrowers. This article tries to understand the underlying rationale of regulatory and judicial movements through both law and society, and law and finance lens.

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Dean and Professor of Law, Shandong University Law School. The author gratefully thanks Professor Thomas Stanton for his valuable comments on an earlier draft of this article and Rochelle MacKenzie-McQueen for her excellent editing input. Correspondence to Shen Wei, No. 5 Hongjialou, Jinan City, Shandong Province, China 250100. E-mail address: shenwei@sdu.edu.cn.

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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

Franklin Allen , Jun Qian & Meijun Qian (2005) “Law, Finance and Economic Growth in China.” 77 Journal of Financial Economics 57116.

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Patrick Honohan (2008) “Cross-Country Variation in Household Access to Financial Services.” 32 Journal of Banking and Finance 24932500.

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Asian Journal of Law and Society
  • ISSN: 2052-9015
  • EISSN: 2052-9023
  • URL: /core/journals/asian-journal-of-law-and-society
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