SHANGHAI — In China's land of economic contradictions, pawnshop visitors aren't just the down and out. They're also the up and coming--entrepreneurs spearheading the country's long march toward market reforms.
The pawnshops help them out by taking as collateral real estate, luxury cars, stocks and bonds. But the shops are flexible, if all you have is a stamp collection, computer equipment or even abstract paintings you drew yourself.
"People who make millions come to me for help because, hey, even the emperor has a bad day once in a while," said Ma Ding, manager at a Shanghai pawnshop.
The second-oldest profession on Earth owes much of its rebirth in China to the problems plaguing the Communist banking system. Private businesses have virtually no access to commercial loans from state banks, which are struggling with mountains of bad debt from lending to poorly operated state-owned industries.
And the development of a personal credit system, even the use of credit cards, is still in its infancy and far from able to provide cash on demand.
So pawnshops are becoming all-purpose lending institutions: They help small businesses by providing funding for payrolls, business supplies, restaurant openings, marketing expenses--even real estate projects and art exhibits.
Pawnshops will go to great lengths to provide whatever the Communist banks can't or won't yet offer, feeding the cash-starved soldiers of China's economic revolution.
"The No. 1 challenge facing small and medium enterprises is funding," said Zhang Lingxiao, a manager at the business service center run by the Bank of China. "Banks are reluctant to lend to them because they have little credit history and little appropriate collateral. It's very hard for them to qualify."
In the early years of Communist China, pawnshops were attacked as a symbol of class oppression. Beijing shut them down in the 1950s, along with all other forms of private enterprise.
The doors to pawnshops didn't reopen until 1987, and demand was so great that the number of brokers nationwide climbed to more than 4,000. But with the healthy demand came shady operators who used the shops to launder money and stolen goods.
To stop the proliferation, Beijing placed pawnshops under the jurisdiction of the central bank in the 1990s. The number of shops shrank to about 1,200, and no new ones were allowed to open.
Then, last August, Beijing switched gears again, releasing pawnshops from the grip of the central bank.
