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Securing Financial Means in an Adverse Environment: Institutional Solutions to Informal Finance in China’s (Semi)-private Sector

Professor Dr Markus Taube, University of Duisburg-Essen

Abstract

The contribution sets out from the ‘law, finance and growth’ literature’s understanding that the quality of the financial system (capital allocation), as well as the design of the legal system (protection of creditor rights) of an economy, are directly connected to its economic performance and the dynamics of its development. Looking at China, however, a paradox arises: here we observe high growth dynamics driven by a substantial expansion of semi-private (collective, TVE) as well as private sectors, but at the same time we detect (prima facie) a defunct financial system, with low depth, a mixed business / policy driven allocation, as well as a serious discrimination against semi-private and private sectors plus weak protection of creditors’ rights. How can this go together and how does the (semi)-private sector collect external financial means in order to expand and run its business? The presentation looks at informal institutional solutions to this problem and discusses some game theoretic solutions to the fundamental cooperation dilemma to the financing problem in China’s private economic sector.

Prof. Dr Markus Taube is Chair for East Asian Economic Studies / China at the Mercator School of Management at the University of Duisburg-Essen. Born in 1965, he started his academic career studying sinology and economics at the universities of Trier and Wuhan (PR China). Later on he went to the Ruhr University Bochum, where he received his doctorate. He is the Walter-Eucken Prize laureate of 1998, Guest Professor at the University of Wuhan (PR China), Member of the OECD-China Investment Network, the Euro-Asia Management Studies Association (EAMSA), the International Society for New Institutional Economics (ISNIE), the European Association for Evolutionary Political Economy (EAEPE), and other associations.

This seminar is part of the World Universities Network Contemporary China Center Virtual Seminars programme. This year’s series will focus on social development and political reform from economic, ethnic and ecological perspectives with a focus on issues of fairness and equality. The series allows audiences around the world to hear from leading scholars in Contemporary China studies and to engage in dialogue with one another across geographic boundaries. Each seminar includes an interactive question and answer session across all sites.

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General information on WUN seminars at Leeds can be found at http://www.leeds.ac.uk/international/wun/wun_seminars.html.

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