Research On The Generation,Transition And Function Of Modern Cooperative Financial System

Cooperative finance has a long history. Traditional cooperative financial organizations are loose and spontaneous union of civil society. For example, the Chinese Cooperation Associations, probably originating from the Sui Dynasty, provided relief financing among members and had basic functions of savings and loans. It still remains the lasting vitality even in today’s highly developed system of banking. Modern cooperative financial institutions can be traced back to the middle of the 19th century when German Raiffeisan and Schultz created Credit Cooperative in rural and urban areas in Germany respectively with the development of capitalist industry and commerce.Since its emergence, modern cooperative financial system has spread rapidly all around the world and many countries have set up a system of cooperative finance of modern sense and even spare no effort to promote and support this system. But after the Second World War, the focus on cooperation system began to show a downward trend, which to great extent resulted from the research paradigm changes of economics from system-oriented research paradigm to the new classical economics.After the break-out of the global financial crisis in 2008, it was found that cooperative finance in the financial crisis performed overall steadier and coped better with the crisis than commercial finance, so people’s attention on cooperative finance increased. But on the whole, the important role of financial cooperation in the social economic life doesn’t match its level of attention gained in the field of economics research currently. In recent years, a lot of new situations and new development of modern cooperative finance have occurred and we need to observe and research the new changes. In addition, China’s Credit Cooperatives haven’t been on the track of cooperative finance after experiencing many changes since new China was founded. The recent mechanical reform of the rural credit cooperative, which started in 2003, has turned back on the road of commercialization. There is no doubt on the necessity of cooperative finance in China, for China is a country with a vast territory and a large population and the unbalanced and multi-level economic development is very obvious. The demand for cooperative finance in our country is an objective existence, and it is also strong. Our country needs to cultivate new cooperative financial organizations and develop modern cooperative financial system, which requires scholars to strengthen research on theory and practice of modern cooperative financial system.The research on modern cooperative financial system should at least cover three aspects:system formation, changing trend, and the identified reality issues, namely the origination, transition and function of modern cooperative financial system. However, the document review shows that existing studies are lacking in these three aspects. This article utilizes the Three-dimensional Financial Architecture Theory and the General Theory of Contract as the theoretical basis to study the three core issues of modern cooperative financial system chronologically with the comprehensive use of various research methods and at last provides proposals on restructuring cooperative financial system and illiterates the outlook of functions of cooperative finance in the process of urbanization in our country on the basis of reflection and reference. The paper, divided into five chapters, develops the following expositions based on the above ideas.The Chapter One is the introduction. This chapter indicates that there are defections in all the three basic issues of the modern cooperative financial system, namely the formation of the system, the trend of transition, the cognizance of the reality, which constitutes the research theme of this paper:research on the generation, transition and function of modern cooperative financial system. This chapter also introduces the theoretical basis of the analysis in the paper, including the recent theoretical achievement of the Three-dimensional Financial Architecture Theory and the General Theory of Contract.Chapter Two studies the establishment of modern cooperative financial system, interpreting how the system was formed. This chapter starts with the generalization of the traditional cooperative finance, and then demonstrates the differences of traditional and modern cooperative finance, and next studies the contractual arrangements of the modern cooperative financial system in its initial stage and systematically elaborates that two crucial constraints transition bring about its generation. This chapter also redefines the essence of cooperative finance by employing the generalized concept of capital asset and capital which was introduced by Fisher. Finally this chapter summarizes the basic features of modern cooperative financial organizations.Chapter Three studies the general laws of the transition of modern cooperative financial system. This chapter begins with the compilation of the transitional process of the cooperative financial system in typical countries and concludes the contradiction between the latest development and some of the existing research. Then this chapter inducts the general laws of modern cooperative financial institutional change, offers hypotheses to explain the above laws, and then conducts verification analysis concerned. Finally it is pointed out that mutual cooperation, mutual complement and mutual influence between the modern cooperative financial organizations and any one of commercial and policy financial institutions characterizes distinctively the development of modern cooperative financial system.Chapter Four explicates the rationality of modern cooperative financial system from the functional perspective, illustrating it is indispensable and irreplaceable as a part of three-dimensional financial architecture. This chapter explains the general functions and special functions, then analyzes and summarizes the general manifestation and mechanism of the function exertion of modern cooperative finance with case studies. Finally the empirical analysis to the special function of the modern cooperative financial system—the financial stability functions to the system itself is conducted.Chapter Five approaches suggestions for the reconstitution and reconstruction of cooperative financial system in China on the basis of reflection and reference, and then describes the expected functions of Chinese cooperative finance in the urbanization.The end is the concluding remarks. It summarizes the main contents of this paper and explains the defects of it.Compared with previous studies, the paper has some innovative aspects below:(1) The paper expounded the problems of modern cooperative financial system systematically and scientifically and found two key constraints’transition which cause the generation of modern cooperative financial system. Further, t by introducing the generalized concept of capital and assets proposed by Irving Fisher, the paper redefine the nature of cooperative finance. This paper also redefines the essence of cooperative finance by employing the generalized concept of capital asset and capital which was introduced by Fisher.(2) Through sorting out the development of modern cooperative financial system in several typical countries, especially the latest developments, the paper overturned some existing research results and opinions. On this basis, the paper studied the general rules of changes in modern cooperative financial system employing the method of comparative static analysis. The theoretical analysis for the general rules in this paper is more deepen and abstract, and therefore has a kind of general explanatory power. The paper also did an in-depth theoretical analysis on the government’s intervention in and withdrawal from the development of modern cooperative finance.(3) The paper studied the functions of the modern cooperative finance more systematically, especially pointed out its particular function of financial stability, which is different from other financial races, and then did empirical test.(4) The paper did a more in-depth analysis on the reasons why the rural credit cooperatives in China didn’t embark on the road of cooperative finance from a historical and cultural perspective, and then gave some suggestions on reconstruction of cooperative financial system on the basis of reflection and reference, and particularly gave an emphasis on the importance of reconstructing urban cooperative finance.There are also some defects in this paper:(1) There is a rather high demand for investigating details of the institutional development if the transition of institution is to be studied. Due to the limitation of time and the difficulty on data collection, the paper only takes the development of German modern cooperative financial system as an example to verify the theoretical hypotheses of explaining modern cooperative financial system transition. In the future, other countries can be investigated to test the validation of the theory.(2) There should be a further theoretical abstraction on the mechanism of realizing the function of modern cooperative finance, and the current analysis is lack of theoretical depth.(3) Due to the limitation of time and the difficulty on data collection, the paper only did empirical validation on the financial stability function of the modern financial system itself because of its special institutional arrangements. In fact, a reasonable inference is that:modern cooperative finance also has a function of stability to the whole financial system. In addition, modern cooperative finance, as a special means of financial resources allocation, adds the diversity of property right structure in the whole financial system, while the diversity of a system is a prerequisite for the stability of it. The follow-up research can test the financial system stability function of modern cooperative finance.