Research On Change And Innovation Of The Rural Financial Institutions In China Based On Perspective Of Institutional Equilibrium

The rural finance should be envolved into the solvency of the problems related to farmers, agriculture and rural areas should. Rural finance is the most important part of rural economic these days, so the relationship between rural finance and economic growth determine the economic development level in rural areas. The demand for economic resources increases as the development of economic, but the supply decreases at the same time. That's to say, formal financial institutions monoply the rural financial market and informal financial institutions are repressed, meanwhile the demand for rural financial service diversifies.The overall framework of this paper is as follows: 1) theoretical fundamental, 2) practical basis, 3) empirical research and 4) application research. The institution factors in this paper are used as the endogenous variable and determinants of rural finacial development. This paper analyzes the institutional change in transition period from an institutional supply and demand perspective. First, we propose that current rural financial system dismatches the development of rural areas and rural economy. Then we focus on the insititutional disequilibrium under the institutional economic framework. Second, the comparative analysis and the data-embracing analysis are used to analyze the institutional change performance of rural credit cooperatives in Shandong Province. This Paper learns from the institutional change in U.S., France, Germany and India, and gave several suggestions on the reform and innovation of rural financial system to break through the bottleneck of rural financial development.The structure of this paper is as follows. Section 1 is an introdunction to the whole paper. Section 2 provides a theoretical fundamental to the institutioal change of rural financial system. Section 3 summarizes the the institutial change of rural finance. Section 4, section 5 and section 6 are important parts of this paper. These three parts first analyse the insititutional disequilibrium and current problems in the rural finance system under the institutional economic framework, then we further into the institutional change performance of rural credit cooperatives in Shandong. Section 7 is experiences of developed countries in institutional change. Section 8 makes some suggestions on the reform and innovation of rural financial system. Conclusion:1. The theoretical analysis introduces institution factors as an endogenous variable of rural economic development in this paper. The framework of our theoretical analysis is: institutional supply, institutional demand, institutional disequilibrium and institutional innovation. Institutional change occurs only when the income is greater than the cost, and the institutional change performance emerges as a result. North paradox tells us that the government will sustain institutional disequilibrium despite of low efficiency in this status if their interests and positions are to be threatened. These are essential in the theoretical analysis of institutional change and institutional performance of rural financial system.2. The problems of farmers, agriculture and rural areas become increasingly important in transition period.The demand for rural financial service enhances as the rapid development of agriculture. There is also constant structural adjustment in the rural financial system during this period, and the adjustment turns out to be disequlibrium, that's to say, the institutional supply and demand mismatches. The supply and demand gap, low efficiency and lack of completeness are all symbols of the unbalanced supply-demand relationship. The institutional economic theories tell us that from a macro perspective, government over interfere in compulsory institutional change and the unique path dependence influence the supply-demand relationship. Meanwhile, from a micro perspective, the preference between rent and efficiency of state-owned rural financial institutions, the institutional restraint and institutional conflict caused by monopoly, property right deficiency and the limited institutional options in rural credit cooperatives, and the slow progress of private financial system because of the preference for institutions and the rigidity of ideology of the government are all close related to the disequilibrium of the current financial institutions, so insufficient institutional supply and excess institutional demand coexist in our rural financial market.3. The comparative analysis and the data-embracing analysis are used to analyze the institutional change performance of rural credit cooperatives in Shandong. We found that the institutional change do not obviously promote the development of the rural credit cooperatives which means that there are problems in the organization itself. The conclusion is conincident with our theoretical analysis. 4. We can learn from the rural institutional institutions in US, France, Japan, Germany, India that the diversification of rural financial institutions is fundamental to the advancement of agriculture, that government assistence rather than government interfere are essential to the development of these institutions and that a perfect legal system guarantees the role of financial institutions in agriculture.5. We can see from the theoretical fundamental and empirical research of rural institutional change that institutional innovation is necessary for the constant and healthy development of rural financial market.First, we should construct a multiple, competitive and efficient rurual financial system under the principles of diversity and endogenous.Then, we should be clear about the responsibilities of the government, change the supply mode of rural financial system.Furthermore, we should construct and complete the credit insurance system and the credit guarantee system in rural areas, enlarge fiscal expenditure on farm households.