Some Coal Money Is Said To Be Flowing Into Microfinancing

This morning, read this article that says as coal mine owners exiting the industry, some of them are putting their money into private lending.

The article says that the global financial crisis has accelerated the coal industry consolidation, which also coincided with the mandate from Beijing to improve safety. As a result, many small coal mines are shutting down or being merged into larger operations. Their owners welcome the chance to wash their money clean and become stock-holding capitalist.

The article didn't cite a source but says that as much as RMB 300 billion ($40 billion) is looking for new investment targets. Some of that has ventured into private lending. According to this article, in the first half of this year, dozens of small-loan lenders have registered in Shan Xi province, bringing in about RMB 15 billion/$1. 8 billion. The majority of it is said to be from old coal money.

I think this is great news if it is true. Rural China needs credit, but the government's policy focus has been more on the fiscal side (tax, subsidy) than on monetary (credit market). At the same time, there are signs that rural China is rebounding after years of neglect and (land, labor) depletion (according to orthodox Chinese Reform-ology, the rural areas was the first to benefit from Deng's Reform in the last 70s. Then withered in the 1990s as industrialization intensified) As the central government trying to "bend the curve" on wealth gap between rural and urban areas, private capital should find it a hospitable environment in the country side.

There will be concerns whether those coal mine owners won't turn their blood money into a usury business, I am sure. But just having them registered, it bring some accountability to the table. Consider the alternative, say like AIG selling credit swaps but chose to be regulated as a pure insurer? Those poor, ignorant Chinese country folks still have long way to go :)