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Informal funding 'can support' real economy

By Wang Xiaotian (China Daily)

09:09, December 16, 2011

A worker welds equipment at a factory in Shandong province. A top policymaker said China must focus on the growth of the real economy and discourage speculation. Dong Naide / For China Daily

BEIJING - Informal finance can be a "helpful" tool to support the development of the real economy, said People's Bank of China Governor Zhou Xiaochuan on Thursday.

"If it can bring its advantage of better access to information, then it can become a helpful supplement to formal finance and the real economy," he said at a forum held by Caijing magazine.

Regulators have been unsettled by events in some areas such as Wenzhou, Zhejiang province, where entrepreneurs involved in underground banking and usurious lending could not repay their debts, causing financial disorder.

"Those illegal activities (usury) will not be protected," Zhou said. "Those engaged in informal finance should play a positive role in supporting the real economy."

Zhou urged the financial sector to provide more support for the real economy, and he said that regulators should be wary of financial products that don't serve that purpose.

"When we develop a financial product, the first thing we should take into consideration is whether the real economy needs it. If only some financial traders care about the product, that means it is too far removed from the real economy."

China must concentrate on the growth of the real economy and fend off speculation, said Yang Weimin, deputy head of the Office of the Central Leading Group on Financial and Economic Affairs, a government policy-making body.

In the first year of implementing the 12th Five-Year Plan (2011-2015), "one thing we need to watch carefully is that there have been signs that our economy is escaping away from the real economy", said Yang.

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