Role of Informal Finance in China's Continuing Economic Development

Informal finance is a very pro-growth institution in China and will continue to be an integral part of the economy in both the short and long run. Two paths that China's economy may take are examined, producing for domestic consumption and producing for international consumption. Analysis of the possible growth of different industries based on types of ownership and potential changes in consumption patterns finds that the path most conducive to increasing the number of informal financial transactions is one in which production is attuned mainly to domestic consumption.