Demand Repression,Supply Repression:a Research On Rural Finance In Transition

In recent years, with the rapid development of market economy, the game between financial sectors and the real economy sector becomes more and more obvious. The lower level the regions are, the easier they are going into the mire of the financial repression and economic stagnation. Weak basis, backward development,"Three Rural" problems, low allocation efficiency of capital resources and unreasonable arrangement of financing system lead to the rural financial repression. This paper focuses on rural financial problems.Finance repression theory proves that there are dialectical relations of mutual promotion and restriction between the financial development and economic growth in developing countries. The lag of financial system will hinder economy development. Underdeveloped rural areas should put finance in priority, breaking the vicious circle of economic growth by reasonable allocation of capital in rural backward areas. Rural financial institutions should improve the quality of service and speed up its reforms to adapt to the changing market demands. Institutions should also ensure agricultural loans on the principle of supply in advance, in order to promote farmers’income growth and accumulate capital for "Three Rural" development.This study is based on the survey of the village and herding area in Inner Mongolia. The less developed northern area is in a transitional period of urbanization. Rural finance faces both opportunity and challenge. As the development of rural areas, the volume of capital requirement will increase significantly and the requirement will also cause higher request to the development of rural finance. However, the problem of "financial insufficiency" in Chinese rural economy development is still outstanding, effective demand in rural areas is still difficult to identify. In the period of urbanization, we should overcome rural financial difficulties and give full play to the configuration function of finance in the urbanization transformation period. The village and herding area in Inner Mongolia faces the double pressure of supply and demand insufficiency; the development of rural finance is suppressed. Since The Reform and Opening-up, the government had also adopted a series of measures to promote and deepen rural financial reform. In order to bring vigor to rural finance market and relieve the strain condition of rural capital, the government strengthens policy efforts to support agriculture development, relax access of the new rural financial institutions and allow the county financial institutions to deduce the deposit reserve rate appropriately. But the effectiveness of the reform was not obvious and had not fundamentally changed the rural financial ecological environment. There are still many problems, for example:deposits absorbed by rural financial organizations still deviating from the farmers need, transferring funds from the countryside to the cities and increasing financing costs of farmers, rural small and medium-sized enterprise, poor financial market supply forcing abortion of microeconomic rural effective financial demand, rural financial institutions lacking innovativeness, single financial products, lack of rural financial credit technology and so on.Through the research, we find that the capital requirement of farmers and herdsmen are small, layered, scattered, multiple, and non-farming. These characteristics are quite inconsistent with the criteria of formal financial institutions. Strict customer identity prevents the farmers and herdsmen of low quality from formal capital institutions. What’s more, the reasons of the lagging of the rural financial development are the shortage of the rural financial supply and lack of effective demand of rural main part. Facing the opportunity of institutional or economic transformation, we should analyze the practical demand and potential demand of rural finance and build a rural financial architecture suitable to the regional characteristics. At the same time, in view of the difference and unbalance of economic development in the area, a multi-level rural finance supply system including agricultural bank, credit union, commercial bank and small loan companies should be built, which can adapt to the different stages of economic development and different development levels. What’s more, the process of the legalization of non-formal finance should be accelerated and make it become a beneficial supplement of formal rural financial organizations to provide financial support for the development of "Three Rural" issues.