Research On Financial Support To The Development Of Rural Economy In Shanxi Province

Shanxi is a big agricultural province in central China, of which the problems facing agriculture, rural areas and farmers are very important problems to affect the economy to have a sustaining and healthy development and the society to have a stable situation. Solving the distribution of resources is the key to solving the problems facing agriculture, rural areas and farmers, so rural financial system as the most important system of distribution of resources will be a focus of rural economic reform undoubtedly. The current major task of the development of agriculture and rural areas in Shanxi province should be directed to promoting strategic adjustment of rural economic structure through either urbanization to transfer surplus rural labor or agricultural industrialization to restructure rural economy, both of which need accumulation and reinvestment of large amount of capitals. Only with financial support can this task be done. Current situation, however, is that most social capitals are invested in non-agricultural and highly profitable industries, and most rural capitals that are already very short in rural areas are devoted to urban areas via various channels, which severely limits the rural economic development in Shanxi province. Investigation showed that since mid 1990s, it has become more and more difficult for rural enterprises and farmers to obtain loans. The shortage of appropriate financial institutions providing efficient services to the economic entities in rural areas and meeting their financial demands puts rural economic development in a difficult position. It is also one of the reasons for the slow increase in farmers' income. Meanwhile, the operation of Chinese rural financial institutions has been restricted in many aspects, which gives rise to many conflicts regarding the financial aggregate, structure, and regulations in rural economic development. In order to address these issues thoroughly, a comprehensive study is conducted in this thesis on rural finance supporting rural economic development, with a focus on the current status of rural finance and the extent in Shanxi province to which it contributes to rural economic development. The existing problems and their corresponding causes are also explored in this thesis, and some suggestions are provided therein as potential solutions. This thesis consists of seven chapters as follows:Chapter one: introduction. In this chapter the author reviews the aim, significance, research method, the opinion of innovation and the internal and research trends.Chapter two: The theoretical framework for finance supporting rural economic development. Economic growth theory, financial development theory, and rural finance theory are employed to analyze the relationship between rural financial development and rural economic development. This framework provides a strong support for analyzing the current status of finance and its contribution to the rural economic development in China.Chapter three: In this chapter, the author depict the historical flux of the formal and informal rural finance supporting economic development in Shanxi province which is the logic beginning of the later research.Chapter four: The empirical analysis of the financial support to the development of rural economy in Shanxi province. The first part is the empirical analysis of rural financial support to economic growth. The thesis chooses the added value of agriculture, forestry,animal husbandry ,fishery and water conservancy and the added value of enterprise of villages and towns as the index of rural economic development level, chooses the ratio of loans of rural financial institution to loans of the whole financial institution and the ratio of deposits of rural financial institution to deposits the whole financial institution as the index of the scale of rural finance in Shanxi province and chooses the ratio of the agricultural loans to the whole loans of financial institution and the loans of enterprise of villages and towns to the whole financial institution as the index of the rural finance supporting rural economic development. The author calculates the gray relation degree between economic development level and financial development level to analyze the function of the rural finance supporting to rural economic growth. In the second part the author analyzes empirically the support of rural finance to the income growth of peasant basing on state space model. A few conclusions are made that the rural finance can affect the rural economic development, but the influence is not big; The influence of rural finance on thr added value of enterprise of villages and towns is bigger than on the added value of agriculture, forestry, animal husbandry, fishery and water conservancy, which shows that the degree that rural finance supports pure agriculture is not big. The loan elasticity of average income of pesants is negative in 1980s in Shanxi province and becomes positive after 1980s, but the value is small and unchangeble for a long time, which shows that the rural finance had not due support to the gowth of pesant income.Chapter five: The status quo of financial support to the development of rural economy in Shanxi proivince. In the first part the author analyzes supply of the financial subject including commercial financial institution, policy financial institution, cooperative financial institution, civilian institution and individual. A conclusion is made that the supplying finance restrain is obvious. In the second part the author analyzes the financial demand of demand subject farmer and middle and small enterprise in rural areas in Shanxi province. Otherwise, the author analyzes if the farmer's financial demand can be met through case, which shows that demanding finance restrain exists is rural areas in Shanxi province.Chapter six: The plight and cause of finance supporing to the development of rural economy in Shanxi province. In the first part, the author opens out the cause of supplying financial restrain in rural areas in Shanxi province and the cause of demanding financial restrain from two sides: natural demand insufficiency and demand insufficiency caused by man. In the second part the author analyzes the inner cause of supply insufficiency from supply subject of rural finance.Chapter seven: To enhance the finance support level to the development of rural economy. This chapter constitutes promoting the whole reform of rural finance system and optimizing the exterior environment of rural economy. This chapter analyzes if the rural cooperative can carry out cooperative system according to different criteria with dynamic games mode theory. At last a conclusion is made that the principle of cooperative system is not suitable for weighing if the system of rural copoperative is cooperative, while mutual financing is suitable.