Research On Financial Supporting Of Development Of Rural Economic In China

The discussions on relationships between Finance and Economic Development were traced back to the beginning of last century. In the Modern Economic Growth theory, the role of capitalization via financing is so outstanding in boosting the economy that it becomes the utmost determinant in almost all the economic growth models. In the market-oriented economy, capital, as a special resource, is assuming the role of directing and distributing other resources. The equilibrium of capital demand and supply as well as their relations directly affect the optimization of resources' distribution and the efficiency as a whole. That is to say, the appropriate distribution of resources is fully embodied in the financial system and its efficiency. It becomes one of the critical factors determining economy' sustainable growth. Some of the general researches have shown that financing is able to reduce the costs of information and trading costs through diversifying the risks, improving the distribution efficiency, exercising proper governance and regulating interest rates, etc.Rural Finance System refers to all the financial activities servicing the productions and operations in the rural areas. Rural Finance system provides the capital as well as financial resources' disposition for the whole rural areas' sustainable economic growth; therefore it is an assurance of economic boom there. Rural Finance system, as a kind of finance system, is connecting capital supply and demand for the purpose of economic development in the rural areas. It impels the whole area' economic growth.When the rural economic development faced with new challenges, the government put forward the strategy of overall planning of urban and rural areas, making the Industry economically support the Agriculture. The key points lie in the fast development of the rural economy and the set-up of farmer income-increase system. All of these need the support from financing. Secondly, with regard to rural economics, the unsolved issues concerning farmer, farming and rural areas have radically impeded our social and economic stabilization and development, and ultimately affect the modernization process of the country. To resolve the problems of resources disposition is the key to resolve the problem of farmer-related issues. Rural financial system as the utmost important capital disposition system will undoubtedly become the focus of the rural economic reform. However, as far as the current situations concern, most of the capitals flow to the high profit non-agro economic divisions, resulting in the prominent lack of rural capital supply. Bank of Agriculture, under the principle of commercialized operation, has largely chopped-off its rural branches. The Poverty Alleviation Funds did not achieve the results as desired. Moreover, the role of capital financing in rural financial industry has been weakened. Agriculture Development Bank is a kind of mono-functioned and lacks the functions of rural policy finance. With major commercial banks seceding from rural areas, Rural Credit Union becomes the major channel of official agricultural loans. Although the rural credit union covers vast rural areas, the amount of loans granted to farmers is still limited. Folk financial mechanism plays a big role, but it is not legally recognized yet. Meanwhile, the rural capitals outflow to the urban cities in various ways. The reasons for the above-mentioned problems lies in that under the dichotomy economics and current financial structure, the existence of restraints in rural financial system limits the financial system's development and financial services supply. How to remove these restraints and set up a complete rural financial system in terms of capital supply to promote the rural economic growth is the topic of this thesis.This thesis starts off at the background information, purpose and meanings of this writing as well as relevant theories between the relations of economic development and capital support.Firstly, an elaborate analysis of the evolution of rural financial system, its status quo and problems was carried out, leading to several enlightening conclusions. Not only there is a huge demand for capitals for the purpose of establishing new rural areas in China, but also the structure of demand is complicated, containing the demand for policy, commercialization and cooperativeness. Therefore, it requires a diversified financial institution and diversified services to match. In terms of capital supply, due to the facts that the function of policy finance is weakened within rural financial system, cooperative finance exists in name only and commercial finance still needs reinforcement, it is not evitable to witness the arise of the conflicts of demand and supply of rural capital and conflicts prick up. All of these is embodied in the rise of folk financial system in rural areas.Secondly, the thesis demonstrates the mechanism of rural economic development's relying on financial support and discusses certain issues on rural financial controls. After a thorough analysis, the author believes that, in rural financial control, supply weighs more than demand. Moreover, the writer assimilates and learns from foreign experiences, and put forward five basic principles of rural financial system structure, that is systemization, complementary diversification, organization, interest rate market-orientedness and sustainability.Thirdly, the writer elaborates on the basic contents of structuring rural financial system, e.g. the policy finance, cooperative finance, commercial finance and folk finance. And he also clearly points out each financial system structure's distinctive functions and positioning, and brings forward some suggestions to those existing problems.Finally, the writer, based on rural financial assets' size, structure and transform ratio, etc, makes an empirical analysis of the overall rural financial situations. Then, he depicts the deficiency of the rural financial system in the following aspects: the growth of rural capital did not give a boost to the economic growth, rural finance stays in the position of " demand follower", which restricts rural economy's growth; the constant lack of support by financial institutions to the rural loans lead to the inconsistency of rural deposits and loans.