Delegates to the mainland's top political advisory body have called for underground banks that operate in the grey area of informal lending and fund-raising to be legalised.
The proposal came at the Chinese People's Political Consultative Conference (CPPCC) in Beijing, and if adopted could give cash-strapped small and medium-sized enterprises (SMEs) access to the credit they are often unable to obtain in the formal lending sector.
It could also help avoid a repeat of controversial charges brought against billionaire Wu Ying , say scholars and entrepreneurs.
Zhejiang tycoon Wu (pictured) is awaiting a final decision from the Supreme People's Court, after being sentenced to death for raising funds with the intention to defraud. She has denied any wrongdoing. The sentence drew an unprecedented public outcry amid calls for mercy. Scholars entered the fray with accounts of a culture of underground banking that was deeply rooted in provinces such as Zhejiang.
Such informal lending practices could be traced to ancient times, when they were used by those needing large amounts of money to start up businesses at a time before banks even existed, said Ming-Jer Chen, a professor at the Darden School of Business at the University of Virginia.
People from the same villages, very often relatives and friends, would pool money to support those in need of cash, in return for an interest payment.