Research team on China's non-government financial development, by Wang Gang, Development Research Center of the State Council (DRC)

Research Report No 172, 2014 (Total 4671)

Abstract:

Historically speaking, Pawning is one of the most important financial services in China. Pawnbrokers offer loans but do not accept deposits so they are unlikely to have high debt levels. They are not shadow banks in the narrow sense and will not generate too many effects on financial stability.

After nearly three decades of restoration and development, the pawn industry has become a helpful supplement to China's financial system and is meeting the financing demands of the public as well as micro, small and medium-sized companies. As we undergo different stages of economic development in recent years, the pawn industry has been negatively affected. This situation is getting even worse as a result of widespread prejudice, insufficient regulations and tighter policies.

It is suggested that the government make clear the functions of pawning and strengthen top-level design. It should also promote legislation, improve financing channels, expand the business scope and improve rules for dead pawn items as well as interest rates. It should improve the supervisory system and enhance the level of supervision as well as orient the industry to advantages and promote its transformation.