Back-Alley Banking - by Kellee S Tsai (Paperback)

About the Book

Chinese entrepreneurs have founded more than thirty million private businesses since Beijing instituted economic reforms in the late 1970s. Most of these private ventures, however, have been denied access to official sources of credit. State banks...

Book Synopsis

Chinese entrepreneurs have founded more than thirty million private businesses since Beijing instituted economic reforms in the late 1970s. Most of these private ventures, however, have been denied access to official sources of credit. State banks continue to serve state-owned enterprises, yet most private financing remains illegal. How have Chinese entrepreneurs managed to fund their operations? In defiance of the national banking laws, small business owners have created a dizzying variety of informal financing mechanisms, including rotating credit associations and private banks disguised as other types of organizations. Back-Alley Banking includes lively biographical sketches of individual entrepreneurs; telling quotations from official documents, policy statements, and newspaper accounts; and interviews with a wide variety of women and men who give vivid narratives of their daily struggles, accomplishments, and hopes for future prosperity. Kellee S. Tsai's book draws upon her unparalleled fieldwork in China's world of shadow finance to challenge conventional ideas about the political economy of development. Business owners in China, she shows, have mobilized local social and political resources in innovative ways despite the absence of state-directed credit or a well-defined system of private property rights. Entrepreneurs and local officials have been able to draw on the uncertainty of formal political and economic institutions to enhance local prosperity.

Review Quotes

Although there has been widespread amazement over the mushrooming of private enterprises in China, Tsai is the first scholar to research where new entrepreneurs get their necessary capital. Through probing interviews and archival research, she directs a bright light into the dark corners of China's gray economy.

-- "Foreign Affairs"

Kellee Tsai has produced an outstanding account of the system of informal finance for small-scale entrepreneurs in China. It sets a standard for research on the informal side of economic change in China.

--Doug Guthrie, New York University "Journal of Asian Business"

Kellee Tsai sets out to explain China's mystery of the missing billions, and she does a formidable job. Extensive fieldwork in Guandong, Fujian, and Henan... allowed her to put together an empirically rich, scientifically rigorous (at least as much as it can be with such a subject) and fascinating study of the various forms that informal financing has taken in reform China. It is an insightful and wonderful read.

--Stephen Green, The Royal Institute of International Affairs "International Affairs"

The actions taken by many local officials to allow or facilitate private entrepreneurs to compete with state banks for savings and channel credit away from state-designated users in the public sector, for example, have run counter to their formal role as the guardians of public ownership and accelerated its decline. In revealing the local political logic behind such unintended consequences of reform, Back-Alley Banking makes an excellent contribution to the study of Chinese political economy.

--Yi-min Lin, Hong Kong University of Science and Technology "Perspectives on Politics"

This book should be required reading for faculty and students focusing on China's political economy. Private entrepreneurs venturing into China should also avail themselves to this work. Tsai has done academic and business interests a tremendous service by documenting how private entrepreneurs use informal financial networks.

--Mark T. Fung, Paul H. Nitze School of Advanced International Studies at Johns Hopkins University "The China Business Review"

This is a remarkable book, and Tsai deserves praise for her insight and ingenuity.... She has compiled rare and valuable information on an informal economy that is, by definition, elusive and unofficial. Tsai is also unusually adept at acknowledging and building upon previous research in fields other than her own--in particular, economics and sociology. In this book she combines scholarship with great storytelling. Back-Alley Banking is essential reading for development economists and China scholars alike.

--John W. Welborn, Cato Institute "Cato Journal"

About the Author

Kellee S. Tsai is Associate Professor of Political Science at Johns Hopkins University.