Underground credit tops US$100b: Survey
(Xinhua)
Updated: 2005-12-08 09:40

China's underground credit topped 800 billion yuan (100 billion US dollars), about 28.07 percent of the funds raised through formal channels, according to a survey carried out by the Central University of Finance and Economics.

The survey is the first of its kind in China to get quantitative figures on underground finance, involving the underground credit scale, rural underground credit scale and underground credit scale in small- and medium-sized enterprises in 20 provinces.

China's underground loans are estimated to stand from 740.5 billion yuan (91.42 billion US dollars) to 816.4 billion yuan (100.79 billion US dollars).

The underground credit scale average index is 28.07, the underground loans are equivalent to 28.07 percent of the funds raised through formal channels, said Li Jianjun, an associate professor with the finance college under the Central University of Finance and Economics.

Since the index is based on figures from 20 provinces, experts reckon the national underground credit index would stand between 26.73 to 29.47, Li said.

The investigators were divided into 76 independent groups to improve accuracy of the survey, targeting approximately 110 small- and medium-sized enterprises and 1,203 businessmen in 82 cities and counties in 20 provinces.

The survey shows that more than one-third of small- and medium-sized enterprises raise funds in informal ways, while less than half of rural households obtain loans from banks.

The more underdeveloped the areas are, the more dependent the locals are on underground financing, according to the survey.