A difficult but necessary beginning to recovery(2)

Bigger moves

Under the proposed law, the annual loan interest rate would be capped at reasonable levels.

Lenders in the underground money market commonly charge borrowers interest in excess of 25 percent a year. Such high costs are widely blamed for stifling innovation because neither lenders nor borrowers would take the risk.

A new government department is to be established under the proposed law to supervise and regulate companies doing financial and other related businesses. These include moneylenders, loan brokers, pawnshops and investment consultants.

At present, these companies, like all other businesses in Wenzhou, are licensed by the city's commerce department. As such, they are not required to observe any form of banking law although some of them are known to regularly take deposits from clients and lend to borrowers.

When the new law comes into force, all companies doing financial-related businesses will come under the supervision of the new department, which also has the final say in the licensing process, the sources said.

The newly established department is also expected to keep a record of all the loans transacted at companies under its supervision.

In addition, an online credit information system will be launched. It will make available to qualified institutions the credit history of local individuals, with details of credit card purchases and loan repayment records.

"We plan to combine the authorized credit rating database from the People's Bank of China with information gathered by the local industrial and commercial bureau to set up a complete database for lenders' references," said Yu Qian, deputy director of Wenzhou's finance office.

The credit rating database is expected to be up and running by the end of this year.

Other initiatives include the hosting of an investment seminar to showcase Wenzhou's opportunities to more than 1,000 businessmen who have moved overseas.

Cen Li predicted that these overseas entrepreneurs of Wenzhou origin will invest at least 5 billion yuan in various projects in 2013. Last year, they invested 220 million yuan in four projects.

"We're keen to encourage more emigre Wenzhou business people to come back," said Cen.

"The financial plaza will eventually work as a platform to help SMEs and individuals to solve financial problems via multiple methods and with lower risks," said Cen adding that his team has been busy preparing the projects, contacting businessmen, and negotiating with banks over the past year.

The establishment of a 1 billion yuan trust fund was agreed between the Export-Import Bank of China and the Bank of China to solve the loan problems of small and micro-sized enterprises.

Cen also persuaded the Zhejiang branch of China Development Bank and the Wenzhou branch of Shanghai Pudong Development Bank to agree to provide up to 3 billion yuan in standby loans to qualified enterprises at the end of January, with the first batch of loans totaling 9.3 million yuan.

A small and micro-sized enterprises self-service bank is also due to be opened by Huaxia Bank to supply private company owners with loans.

The latest figures from the financial plaza showed that 20 financial agencies had gathered more than 18.6 million yuan for small and micro-enterprises since January.

A website has been launched and a financial reform service hotline will be made available to the public soon.

"We want to let every single individual feel the existence of the financial reform," said Cen.