China's pawn-broking industry and the puzzle of losses during the global financial crisis in 2008-2009

Zhou, Liming and Yao, Shujie and Wang, Jinmin and Ou, Jinghua (2017) China's pawn-broking industry and the puzzle of losses during the global financial crisis in 2008-2009. China: An International Journal . ISSN 0219-7472 (In Press)

[img] PDF - Repository staff only - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
Download (206kB)

Abstract

In China, pawnbrokers not only provide financial intermediation services to individuals and households who need to finance their short-term gap between consumption and income like those in many other countries, but also serve as a supplementary financing channel for private entrepreneurs and small and medium-sized enterprises (SMEs) who face difficulty in obtaining formal credits. This paper uses the first-hand survey data in 2008-2009 in Zhejiang Province, one of the pioneering regions for developing pawn-broking business, to study the special characteristics of the pawn-broking industry and explain why it has become a viable and useful financing instrument in transitional China. Through examining why there was a serious setback and widespread loss in the industry during the global financial crisis in 2008-09, we argue that the crisis increased the default rate of export-oriented SMEs, which reduced their demand for pawn-broking loans. The strict regulations in the pawn-broking industry and the low efficiency of litigation in China also increased the operation costs of handling defaults by the pawnshops, leading to a temporary setback in an otherwise rapidly growing pawnbroking business during the crisis. However, the pawn-broking industry will continue to play an important role in financing SMEs in China in the foreseeable future.

Item Type: Article
Schools/Departments: University of Nottingham, UK > Faculty of Social Sciences > Nottingham University Business School
Depositing User: Eprints, Support
Date Deposited: 07 Jun 2017 13:52
Last Modified: 08 Jun 2017 11:34
URI: http://eprints.nottingham.ac.uk/id/eprint/43457

Actions (Archive Staff Only)

Edit View Edit View