Confucian culture and the rise of folk finance

Private finance refers to those financial activities outside the formal financial system, including private lending, commercial credit, and lending activities of cooperatives, pawns, microfinance companies and even P2P online lending platforms.

China's non-governmental financial activities have a long history of more than two thousand years. As early as the Shang and Zhou Dynasties, the borrowing activities within clans appeared in China. The prosperous commodity economy in the Tang and Song Dynasties created a prosperous financial market, and financial institutions such as treasury, counter store and gold and silver store appeared. The Ming and Qing dynasties ushered in the peak of financial development, forming a traditional financial market dominated by banks, banks and pawns.

After the founding of China, the state began to carry out socialist transformation of the traditional financial industry, and non-governmental financial activities completely disappeared. Until the reform and opening up, with the development of private enterprises and the increase of financing demand, the government began to realize the positive role of private finance in reducing the credit pressure of banks and optimizing the allocation of resources. The private financial market has gradually recovered and become an important financing channel for entrepreneurial families and small and micro enterprises. According to the survey data of China's household finance in 20 13, 22.3% of households and 77% of indebted small and micro enterprises in China raised funds through private financial markets, and the scale of private financial credit was about 5.28 trillion yuan, an increase of 18% compared with 4.47 trillion yuan in 201year.

Although the non-governmental financial market has developed rapidly since 1980s, China has not explicitly regulated non-governmental finance in the form of laws or policies and regulations, and most of contemporary non-governmental financial activities are in the gray area of policies. Until August of 20 15, the legislative affairs offices of the Supreme People's Court and the State Council successively published the Supreme People's Court.

Similar to the development of contemporary folk finance, the prosperous financial industry in China's history also developed under the imperfect legal system and government supervision. Therefore, before examining the decisive factors of the rise of contemporary folk finance, it is necessary to take history as a mirror and explore the system on which financial activities depend in China's history.

Take the Qing Code "Qing Laws" as an example. Of the more than 2,000 written laws, only 3 or 4 are directly related to commercial disputes, while the Laws of the Qing Dynasty focus on mediation and dispute resolution, so its enforcement is relatively weak. For example, "Laws of the Qing Dynasty" clearly stipulates: "The monthly interest rate of private lending money, goods and debts and pawn finance shall not exceed three points." However, in practice, it was common that the interest rate of pawn and private lending exceeded three points at that time, and the monthly interest rate of private lending might even be as high as 20%-30%. However, the government did not bring these loan sharks to justice one by one, and increased the punishment according to law.

Historically, the operation of banks and the execution of private lending contracts may not depend on the magistrate, county magistrate or legal provisions, but the main mechanism lies in the folk credit culture advocated by Confucianism, such as honesty and clan ethics, which has been passed down as orthodox ideas for more than 2,000 years.

Our loan business is mainly credit loans, generally without mortgage, and moral commitment is the most important loan guarantee mechanism. In order to alleviate the information asymmetry in financial transactions and reduce the credit risk, banks have always followed the traditional operation mode of "running brokerage deposits". By employing "running brokers" and other "local strongmen", we investigate, collect and analyze the identity, personal reputation, property, use of funds and risk status of loan projects.

In order to verify the relationship between Confucian culture and the prosperity of traditional financial market in history, we measure the influence of Confucian culture by the number of Confucian temples and martyrs owned by governments at all levels in the Qing Dynasty, and take the number of banks, banks and capitals of governments at all levels in the late Qing Dynasty and the early Republic of China as the measure of the prosperity of traditional financial institutions.

More importantly, culture can be continued and maintained for a long time through words and deeds handed down from generation to generation. As the orthodoxy of China, Confucian culture has gradually formed universally observed ethics and social norms in the process of historical accumulation and long-term inheritance, and it still exists widely today.

In the process of the rise of contemporary folk finance, Confucian culture and the clan system that it admires may still play a supporting role that cannot be ignored. Contemporary private lending transactions are based on trust, relying on acquaintances to obtain the information of the demand side of funds, thus alleviating the information asymmetry between borrowers and borrowers, and relying on cultural mechanisms such as reputation, morality and ethics to ensure the performance of lending contracts and prevent the risk of default. The Confucian moral standard system with "courtesy, righteousness, benevolence, wisdom and faith" as the core and the clan ethics advocated by it provide institutional support for private financial activities.

Although it is not explicitly stipulated in moral ethics and social norms, it is also binding, so ensuring the performance of private lending contracts is conducive to the formation of a good social and economic order.

In addition, Confucianism, which attaches importance to family and clan, helps to form a stable network of acquaintances. Members in the network have frequent contacts, know each other and have basically symmetrical information. Defaulters of private lending will also suffer reputation loss and moral condemnation. So as to ensure the credible threat of information dissemination and punishment in acquaintance relationship, family law and clan rules can also supervise the financial transactions of internal members, which is conducive to reducing the transaction cost and default risk of private lending.

Therefore, the stronger the influence of Confucian culture, the more prosperous the local private financial market, and the lower the default risk of private lending. A typical example is Jiangsu and Zhejiang, where private lending is very active and is the forerunner of the development of private finance in China.

Take microfinance companies as an example. According to the statistics of the People's Bank of China, by the end of 20 17, the number and capital of small loan companies in Jiangsu Province ranked first in China. There are 956 microfinance companies in Jiangsu and Zhejiang provinces, with paid-in capital as high as 138384 billion yuan, and the number of institutions and capital account for 1 1% and 17% of the whole country respectively.

Jiangsu and Zhejiang provinces are famous for their cultural origins. In the Qing Dynasty, there were 5,636 scholars in Jiangsu and Zhejiang provinces, among whom 47 were top scholars. The number of Jinshi ranks in the top two in China, accounting for 23% of the total number of Jinshi in Qing Dynasty, with an average of 39 Jinshi in each county. Moreover, in the Qing Dynasty, Jiangsu and Zhejiang provinces built 1 17 1 and127 Confucian temples respectively, resulting in 96 16 martyrs and 16385 martyrs. Today, the number of genealogies preserved is as high as 36 19 and 12900 respectively. The number of Confucian temples, martyrs and genealogy accounts for 12%, 30% and 39% of the total number of 18 provinces in the Central Plains respectively, which shows the prosperity of its Confucian culture.

Another example is the obvious differences between Jining and Shexian in Shandong Province in the Qing Dynasty in Confucian culture and the development of contemporary folk finance. Jining, near Qufu, the hometown of Confucius, is a place where Confucian gentry and literati live together. Confucian culture was very prosperous in Qing Dynasty, with 326 students, 26 Confucius temples and 3,568 martyrs. In the corresponding contemporary administrative divisions, there were 10 microfinance companies in Jining in 20 16, with a registered capital of122 million yuan. In 20 15, there were as many as 63 private capital management institutions in Jining with a registered capital of 3.688 billion yuan, second only to Linyi in Shandong province 17.

Shexian County, which belongs to the southwest of Shandong Province, had a poor style of writing in Qing Dynasty. Only 10 Confucian Temple was built, resulting in 35 juren and 7 15 martyrs. There are only three small loan companies in four municipal districts of Zaozhuang with a registered capital of only 240 million yuan, while there are only six private capital management institutions in Zaozhuang with a registered capital of only 65.438+85 million yuan.

It can be seen that the number of Confucian temples and martyrs in Jining is far greater than that in Shexian county, which is deeply influenced by Confucianism.