Finance and Development: Financing Township and Village Enterprises in the People's Republic of China
Before 1994 the PRC's Township and Village Enterprises (TVEs) achieved rapid growth, financed by the banking sector under a specialized banking system. After 1994, while the level of financial development has risen and the legal system related to finance has improved greatly, TVEs have had difficulty in accessing bank finance. This paper's main concern is to understand the deviation between financial development in the PRC and TVE's growth experience.
The analysis indicates that banking sector reform has transformed lending from a relationship-based contracting system into a legal-based one. However, the enterprise sector (including TVEs), has seen only slow progress on the transition to full property rights. An imperfect legal framework to define, identify, and protect property rights leads to the difficulty TVEs have in accessing legal-based loan contracts.
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The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
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