ABSTRACT
This chapter considers the logic of solving the private lending puzzle and explains the rationale for regulating the private lending market by considering regulatory theories as well as China’s practical needs. It examines the background and development of the Wenzhou Pilot Financial Reform: in particular, the making and implementation of the Wenzhou Private Financing Regulation and the Wenzhou Private Financing Index. In 2012, the Wenzhou municipal government launched the Wenzhou Private Financing Index to track the interest rates of private financing activities. The Wenzhou Index was compiled by the Wenzhou Financial Affairs Office with rigorous statistical methods to reflect the level, tendency, and fluctuation of the price of private financing. The private lending crisis has been a game changer in China’s private financing industry. Wenzhou has a well-developed private economy, with abundant private capital and dynamic private financing activities, making it a perfect place to test the financial reform.
