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Wenzhou outlines lending reforms

By Song Shengxia (Global Times)

08:02, May 22, 2012

The judicial bodies of Wenzhou, a city in East China's Zhejiang Province that has recently launched pilot financial reforms, announced yesterday 30 measures to support the reform and formalize private lending and borrowing.

The Intermediate People's Court of Wenzhou will properly recognize the validity of private loan contracts and protect legal private lending and borrowing, it said in a document published on its website yesterday.

The court will be committed to containing loan sharks and speculation in private financing with a view to reducing the financing costs for private businesses, the document said.

It will recognize the validity of the documents which the creditors file with the private lending registry service center as lending proof in accordance with law, in order to formalize and regulate private financing, the document said.

The court will also support the policies and measures to encourage individuals to invest directly overseas and regulate the development of overseas investment consulting service agencies, it said.

"The judicial sector has a big role to play in promoting financial reform innovations, besides the financial departments," Chen Youwei, vice president of the Intermediate People's Court of Wenzhou, said in a statement e-mailed to the Global Times yesterday.

The court and grass-roots courts where the conditions are mature will set up trial courts especially for financial cases, the document said.

Cases related to private lending and borrowing that courts across Wenzhou have been receiving have been rising in recent years.

Courts across the city received 12,000 such cases in 2011, a surge of 46.4 percent from a year earlier and 316 percent from 2007, involving 5.4 billion yuan ($853.74 million), data from the court showed.

The State Council in March introduced a pilot financial reform to help regulate private financing activities in the city, where private lending is reportedly most active for small and medium-sized businesses.

"The new measures by the court are an active response to rising private lending and civil disputes over private lending in Wenzhou and the package of the reforms released recently in the city reflects the authorities' determination to push ahead with the financial reform," Zhuo Yongliang, director of the Development and Reform Research Institute of Zhejiang Province, told the Global Times.

"To further speed up the reform, we should get rid of the mindset and practice of treating private financing as something special and something that needs special regulation. The central bank should also further liberalize the interest rates to contain shark loans," Zhuo said.

The Wenzhou branch of the People's Bank of China (PBC) last week revealed interest rates for private lending monitored in April in the city, as part of measures to support the financial reform.

The average annualized private lending rate in Wenzhou is 21.58 percent, down 3.02 percentage points year-on-year and 0.8 points month-on-month, according to an announcement by the PBC's local branch.

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