On Institutional Reform Of Rural Credit Cooperatives In China

In 1847, Friedrich Wilhelm Raiffeisen established the first rural credit cooperative in Germany. For more than 150 years, cooperative finance obtained great development all over the world. Cooperative movement began in 1920s in China. In initial days of PRC, cooperative finance progressed quickly. Rural credit cooperatives, rural production cooperatives and rural commerce cooperatives made a great contribution to renewing agriculture and realizing rural collectivization after national liberation.Since 1958, people believed that public-owned system was the best. From then on, Chinese country practiced collectives, and rural credit cooperatives lapsed from cooperative system. The property rights arrangement, corporate governance and management system of rural credit cooperatives closed to state-owned banks gradually. Rural credit cooperatives became the appendage of the state-owned banks for a time. Although rural credit cooperatives started a few reforms later, they couldn't return to the cooperative system. Since 1979, state dealt with rural finance, only a small quantity of cooperatives bloomed, most cooperatives run into plight. In the end of 2002, the capital of countrywide cooperatives is -1227 hundred million, and the capital adequacy is -8.5%.China is a giant developing country. The peasant is almost 70% of the population. Rural finance is weakest field of national finance. Being the primary provider of rural finance, credit cooperatives are more important than others. Since 2003, state launched the bran-new reform of rural credit cooperatives. State department required the correlative side must comply with the following principles. Firstly, according to the market economy rules, rural credit cooperatives should define property rights, perfect corporate governance, and become the entity of self-management, self-restriction, self-development, and self-bearing-risk. Secondly, according to the rules of serving agriculture, rural credit cooperatives should improve the methods of service, perfect the functions of service, to be the main force of rural finance and the ligament of peasants. Thirdly, according to local conditions, rural credit cooperatives should explore and try shareholding system, stock cooperative system or cooperative system, to set up proper organization and operation mechanism. Fourthly, according to the combination of duty, right and profit, the government should mobilize enthusiasm of every side, make sure the regulatory responsibility of rural credit cooperatives. This reform has two aspects. Firstly, rural credit cooperatives should base artificial person, to reform property rights system, to perfect corporate governance and to choose proper property rights institution. Secondly, state should reform the management system of rural credit cooperatives, deliver the management right to provincial government.We needing what kind of rural finance and we needing what kind of rural credit cooperatives is the core of this thesis. The author according to the history of Chinese rural credit cooperatives, analyze the problems of rural credit cooperatives, probe the conditions and paths of reform of credit cooperatives based on Marxist economics, new institutional economics, game theory and sociology.This thesis consists with seven chapters.The first chapter is introduction. The author introduce the basic concept of cooperative economy and cooperative finance, point out the reason of composition, recite the study of cooperative economy and cooperative finance, and illuminate the thoughts and methods of the thesis.The second chapter is the foundational investigation to the rural credit cooperatives. The author describe the change of rural credit cooperatives in China, analyze the problem of credit cooperatives, point out cooperative system is incentive incompatible to the rural credit cooperatives, and define the contents of reform of credit cooperatives.The third chapter is the reform of property rights of rural credit cooperatives. We think the arrangement of property rights is foundation of economic institution and enterprise framework. The initial property rights arrangement of rural credit cooperatives is cooperative system. Since 1958, the property rights arrangement of rural credit cooperatives was nationalized and fainted. Rural credit cooperatives should explore and try shareholding system , stock cooperative system or cooperative system. On the other hand, the state should define and protect the property rights of credit cooperatives.The fourth chapter is the reform of corporate governance of rural credit cooperatives. Corporate governance is a kind of institutional arrangement correlative to the stakeholder of the firm. The ideal status of corporate governance of rural credit cooperatives is quite different to its reality. Its reason is behind of the converse choice of stockholders, the moral hazard of manager and the political control of local government. The key of perfecting corporate governance of rural credit cooperatives is to adjust the management of directorate, supervisory and manager, to strengthen financial regulation, and define the duty of provincial united-cooperatives.The fifth chapter is the reform of management system of rural credit cooperatives. We think management system is exterior cooperate governance of the firm in substance. Nowadays, the management system of rural credit cooperatives is double-deck macro structure composing of county united-cooperatives and provincial united-cooperatives. The problem of this management system is the provincial united-cooperatives making moral hazard, the local governments executing political control, and the defeat of reform. The key of optimizing management system is to define the duty of provincial united-cooperatives, and improve the behaviors of provincial united-cooperatives.The sixth chapter is enhancing the regulation of rural credit cooperatives. Financial regulation is a kind of important method to keep away moral hazard of the managers of rural cooperatives. We should unify the regulatory standard of rural cooperative banks and rural credit cooperatives as the commercial banks according to the request of same rules and risk control. At the same time, we should perform different regulation according to different organization.The seventh chapter is the compensatory measures of the reform of rural credit cooperatives. They are to perfect rural financial market system, to improve settlement of rural credit cooperatives, to increase the ability of staffs of rural credit cooperatives, to improve the rural financial entironment, and to mend the behaviors of local governments.The main innovative work of this thesis is:1. Establishing the institutional system of reform of rural credit cooperatives. The author considers the reform of property rights arrangement is essential. Based on the reform of property rights arrangement, the author analyzes the reform of corporate governance, management system and regulation of credit cooperatives.2. Pointing out cooperative system is incentive incompatible to the rural credit cooperatives, based on incentive theory. The author considers the aim of reform of credit cooperatives is markertization.3. Pointing out cooperative system is a kind of property rights arrangement. The author establishes altruism model to analyze cooperative system.4. Explaining the corporate governance and management system of credit cooperatives, based on self-organization theory.5. Pointing out united cooperatives is a kind of intergradations, according to its duty and the nature of rural finance.6. Pointing out CBRC should execute enabling regulation to rural cooperatives, according to the frangibility of rural finance in China.The main shortage and struggling direction for the future of this thesis are:1. The study has put forward the analytic frame of the reform of rural credit cooperatives, whether is it correct needs to be inspect with practice.2. This thesis is no deeper analysis of the overseas study about cooperative economy and cooperative finance. 3. The qualitative analysis is abundant, but the quantitative analysis is deficient. Otherwise, the demonstration is poor.4. Because of the rural political factors being exigent, this thesis is deficient to analyze its correlative reform of political system.