This chapter details the evolution of Chinese informal finance, describing the different types of informal finance that have eased constraints posed by the formal financial sector. It discusses why informal finance is important and how it has evolved, as well as what can be further done to improve informal finance. Informal finance has been rejuvenated since the reform and opening-up policy of the 1980s, as China has experienced the transition from a planned economy to a market economy, as well as the transition from single-ownership to multi-ownership and a rapid boom of the private economy. Because of the critical role of informal finance in the economy, the government should regard informal finance as a “weathervane” that can forecast the credit demand of the financial market; as an innovation, which can optimize the allocation of institutional resources; and as an induced institutional arrangement, which can fix up the problems brought about by state-oriented financing and institutional change.