Chinese Financial System

The difference between direct and indirect financing:
The difference between direct and indirect finance is that in the first case, it takes place between a lender and a borrower, with no intermediary (i.e. the bank). It takes place between an ultimate lender and an ultimate borrower.
On the other hand, indirect finance involvers a 3rd person, that in most cases, is the bank. So if I borrow £100 from the bank, I am effectively borrowing £100 from the person who deposited that money in the bank (so he is technically the one loaning me the money). In this case, he is insured against the risk of default as the bank will cover the loan should I default on the payment. In this case, the lender is not insured so I think it’s more risky
As a result the cost (interest) of direct finance is higher because of higher risk of not settling back the loan: the lender has no insurance since there are no intermediaries. As a result the lender will ask for a better return rate, which is obvious.

Difference between direct investment and portfolio management:

Foreign direct investment (FDI) pertains to international investment in which the investor obtains a lasting interest in an enterprise in another country. Most concretely, it may take the form of buying or constructing a factory in a foreign country or adding improvements to such a facility, in the form of property, plants, or equipment.
FDI is calculated to include all kinds of capital contributions, such as the purchases of stocks, as well as the reinvestment of earnings by a wholly owned company incorporated abroad (subsidiary), and the lending of funds to a foreign subsidiary or branch. The reinvestment of earnings and transfer of assets between a parent company and its subsidiary often constitutes a significant part of FDI calculations.

An investor's earnings on FDI take the form of profits such as dividends, retained earnings, management fees and royalty payments.

Foreign