| This dissertation focuses on the theory and empirical test on China's rural financial risks. By summarizing financial organization theory, financial risks theory and financial development theory, it redefines theory frame of rural finance and rural financial risks control. On a basis of evolvement of rural financial organization and history & reality of system changes, it analyzes the process of China's rural financial development, finding the dominating factors that influence and restrict China's rural development in formal finance and informal finance. From two aspects of internal operation and external environment of rural finance, this paper devotes to study risk problems, its formation mechanism and its transferring effects during the development of rural economy and finance. By establishing early warning index systems and models of China's rural financial risks based on the situation of our country, it has presented rural financial risks and structured mechanisms of precaution, dissolving and savior in China. Finally, aiming at reform in rural banking system and rural financial strategic restructure it has put forward strategic modes and policy measures in China's rural finance.1. Basic conclusion in the thesis(1) Rural financial development in China is facing the serious risk problems. After historical analysis, organizational analysis and statistical analysis of China's rural finance, it is found that development in China's rural finance usually accompanies financial risk. At present, development in China's rural finance is facing obstacles from risks in its own internal operation on one hand, and is confronted with great pressure from risks in external environment condition on the other hand. If allthese couldn't be improved effectively, it will be impossible for rural finance and rural economy to develop soundly.(2) Rural financial risks are due to the special background and causes. By time serial analysis on stages of 1952-2003 and 1978-2003 in China's rural finance and economy, we can find that no matter the internal risk problems of China's rural finance or the external ones are all systematic risks. The "Dual Structure " in economic and financial development in China has led to internal and external risks of China's rural finance.(3) We should attach great importance to rural financial risks in China for their danger. This research analyzes materials of China's rural finance from 1978 to 2003, and builds up early warning index system of rural finance monitor. It is suggested that the macro circulation of China's rural finance is not sound and that the risks, which are accompanying by comparatively serious hidden troubles, will be a threat against the sound development of rural economy and national economy.(4) Rural financial risks in China should be settled radically. By building a model for precaution against and supervision over rural financial risks to fully demonstrate rural financial risks, the inherent laws of formation, transmission and diffusion of rural financial risks can be grasped. This research has proved it by taking use of the fuzzy control theory, Logit Model and Probit Model. The risk problems of China's rural finance, particularly risk problems in its external environment, must be cured with "a strong medicine". From the rural banking system, taking development of rural marketing economy as a goal, we should carry on strategic restructuring to the whole rural finance to accomplish "treating both principal and secondary aspect of disease". Only by doing this, the source where rural financial risks are rooted can be effectively controlled.2. Important viewpoints in the thesis(1) The relationship between rural finance and rural economy is not the simple paradigm of economy's deterministic role on finance, or finance's counteractive role on economy. Only if the development strategy based on making overall plans concerning the development of rural and urban economy and finance, the service functions of rural finance on rural economy could be put into full play.(2) In the transformation process of formal rural finance in China, the central government always plays a leading role, which forms strong path dependence problem. Therefore, compared with rural economy, rural finance started exogenously, which restrained the financial demand of rural economy.(3) The evolution of rural informal finance in China, which is a form of demand leading institutional change, is completely different from the development of rural formal finance.(4) The risk problems of rural finance in China have the characteristics of general financial risks. However, as China is in a transition period with a typical dualistic economic system, the internal and external risk problems of rural finance fall to their unique institutional risks. The nature of rural financialrisk formation, transmission, and diffusion could be understood, and the alert system could be set up to alarm and supervise risks. The risk prevention mechanism and risk alert system should be built in harmony with each other. And the micro-constrain mechanism and macro-control mechanism should be set up in accordance with the rural economy and finance.(5) The rural financial risk prevention and alert system should aim at early recognition of risks and effective control of risks. Dissolving financial risk and saving financial organizations in crisis are crucial to maintaining ecological balance and sustainable development of rural finance.(6) The strategic reorganization of rural finance is not only important to the development of rural economy and rural finance, but also crucial to the whole Chinese economy and financial development. It is both imperative and feasible to reengineering rural finance. At present stage, the development of rural economy requires the reform of rural finance. On one hand, through developing pluralistic financial organizations and fair competition, rural finance can satisfy the various demands from rural economic entities. On the other hand, market development and globalization requires rural finance to dissolve its internal operating risks and withstand external risks.3. Main innovation in the thesis(1) Employing methods of statistical, historical and system analysis, it has shown rural financial system and the process of organization changes in an all-round way, finding the dominating factors in China's rural financial development.(2) Adopting some economic methods such as utility and game theory with statistical institutional, mathematic and case analysis, it expounds financial risks occurring in rural financial development in China.(3) Employing such analytical methods as Regression, Co-integration Test, Granger Causality Test and impulse-response, it has announced China's whole financial development in an all-round way, the interrelation between rural finance development and rural economic growth, and the producing mechanisms and transferring effect of China's rural financial risks(4) According to China's specific state status, this thesis establishes early warning index system, with the fuzzy control theory, Logit Model and Probit Model, it built a model for rural financial risks precaution and supervision to fully demonstrate rural financial risks.(5) The paper puts forwards financial growth mechanism and development models, which attunes to the adjustment of rural industrial structure. Based on this, the channels for investment and financing which expand development in agriculture and rural economy have been innovated in this thesis.4. Some proposals put forward in the thesis(1) To perfect the rules and regulations in rural finance to meet the rural economic development. Itis the foundation for removing rural financial suppression and developing rural finance and rural economy in harmony to perfect the regulations concerning the rural finance that is serving the rural economy. The followings are details: Firstly, guarantee qualification soundness and behavioral norm of the rural financial entities subject to the law; Secondly, safeguard the good rural financial environment dependent on the strength of legal system; Thirdly, limit the administrative activities of the governments of all levels within the law.(2) To speed up building internal control and governance structure in rural finance. Firstly, set up innovative patterns of rural financial property system as soon as possible; Secondly, perfect the structure of principle-agent in rural financial institutions; Thirdly, make great efforts to build a centralized, high-efficient and powerful internal control system. In addition, a really effective internal control system must set up power control system to perfect the responsibility monitoring mechanism. Only responsibility is clear, could it make the persons in power prudently use their own power, to realize effectively mutual controlling horizontally or vertically.(3) To facilitate adaptability development in rural formal finance. Base on development level of rural economy and finance in today's China, a government-incentive growth mechanism in rural finance should be set up, to provide a continuous positive incentive for rural finance which is serving rural economy. Therefore, our government should accomplish such objectives: Firstly, implement fiscal subsidies policy to cover interest in agricultural loan and to guide credit funds to allocate to agricultural departments progressively; Secondly, raise funds and establish guarantee organizations for the rural loans, in order to solve the problem to some extent that farmers are difficult to obtain loans from banks; Thirdly, coordinate and set up the guild and information platform to avoid blind investment and malignant competition in the line.(4) To lead the rural informal finance to grow up on the basis of the standardization-oriented. Firstly, the government should loosen regulations over informal finance and allow pluralism of the rural financial institutions. Secondly, the government should promote informal financial institutions, which are normalizing to change into private financial institutions gradually. Thirdly, the government should support and guide the informal finance. We must realize that the informal finance is a kind of system whose existence is not only essential, but also an important system, which is running side by side with the formal finance.(5) To strengthen regional cooperation for precaution and supervision in rural finance. In order to achieve regional cooperation on intensification precaution and monitor to safeguide rural finance in modern times, we should pay attention to the following measures: Firstly, set up information system of early prewaming which has a sensitive reaction, timely feedback, smooth channels and mutual information. Secondly, intensify cooperation of rural economy and finance across the areas. Finally, establish system of regional information interchange and to intensify information sharing in rural economy and finance across the areas.
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