The Research On Institution Change Of China's Rural Credit Cooperatives In Transformative Period

In the past 30years since open policy, the rural credit cooperatives of China served for the agriculture, countryside and farmers, and at the same time, the institution of rural credit cooperatives also experienced great change. This dissertation analyzes this change starts from relationship between the institution change of China and the financial institution change.To the institution change of China, the reform of SOEs (State-owned Enterprises) is the core and nodus. To insure the stable development of economic, the commercial banks in China provide numerous financial resources to the SOEs which promote the successful economic re-channel. This is the background of China's financial which determines the features of financial institution change, that is, the institution change under the finance control of government. As important component of China's financial system, the institution change of the rural credit cooperatives was greatly affected by financial control. Different institutional features were presented because of the different purposes of finance control in different periods, so finance control is the key to analyze the institution change of rural credit cooperatives.Firstly, this dissertation introduces the concepts and related theories of the institution, institution change, finance institution change, and cooperative finance, which consist of the theoretical basis of this dissertation. New institutional economics takes the institution as its research object, and thinks that the institution affects and even decides the effectiveness of economic development. Institution change can be divided into induced institution change and compulsory institution change according to the different subjects. The research about finance institution change in foreign countries is mainly involved in the functions of banks and the relationship between the economic development and finance development. But domesticly, researchers mainly put their eyes on the finance institution change of China. Because the initial condition of China's finance institution change is planned economy, the government dominates the resources collocation and the reform absolutely. This is why China's finance institution change is compulsory and dominated by government, which shows the features of gradualism, lag and route dependence. Cooperative finance is a kind of way of capital finance based on the cooperative economic organizations, which has the characteristics of"mainly for the combination of people, and subordinately for the combination of capital". The leading characteristics of the property right of cooperative finance are the equal initial ownership, and the equal rights of management and income enjoyed by stockholders. So the share structure is separated with high cost of internal supervision, and prone to"insider control".Secondly, this dissertation expatiates the core theory—theory of finance control all-around and systematicly, and introduces the utility function of finance control by government. Finance control means that the government controls the finance resources collocation to realize its special targets, though the measures of making financial policies, enhancing industries management and controlling personnel appointment. Concretely, it concludes resources control and risk control. This dissertation also establishes the utility function of government finance control, analyzes some variables, and points out that finance control can promote social stability through benefits compensation, industries support and financial risks mitigation. In the process of China's institution change, the government keeps the control to financial institutions as state-owned commercial banks and the rural credit cooperatives, and so on. Under the background of"weak fiscal measures and strong financial measures", the government can get big amount of low-cost financial resources to replace fiscal capital to support SOEs'reform, which is important to the success of China's economic re-channel. In order to implement finance control, the government will put forward corresponding institutional requests and restricts to the financial institutions, which affects their institution changes essentially. So, finance control is used as an important theoretical instrument to analyze finance institution change in this dissertation.Thirdly, this dissertation utilizes the finance control theory to analyze the institution change of China's rural credit cooperatives in transformative period (from 1978 to now). After the brief introduction to the history of rural credit cooperatives from 1949 to 1978, this paper divides the institution change of rural credit cooperatives of transformative period into three phases, and analyzes the evolution process of the property rights and management system of the rural credit cooperatives in different phases. From 1978 to 1996, the institution change of RCCs is primarily connected to the reform of SOEs. In the period of China's economic re-channel, keeping the operation of SOEs is essential to the whole institution change. Under the background of"weak fiscal measures and strong financial measures", the government obtains big amount of low-cost financial resources from state-owned banks (including RCCs) to support SOEs'reform, which is an important factor to affect finance institution change of this period. The government can collect rural savings to support SOE's reform by keeping the system of RCCs being managed by Agriculture Bank. From 1996 to 2003, the main purpose of the RCCs'institution change is to mitigate financial risks. Because the government transferred a lot of financial resources to support SOE's reform before 1996, the state-owned banks including RCCs accumulated a big amount of bad assets. When domestic stock market became another important way to support SOEs'reform, it alleviated the pressure of banks, and provided the opportunity for the banks to mitigate the risks of itself. In order to mitigate risks of RCCs effectively, the government took prudent measures to divide the RCCs from the Agriculture Bank. The People's Bank of China carried on the responsibility to manage the RCCs there after. After 2003, the main purpose of RCCs'institution change is to serve agriculture, countryside and farmers. Since 1990s, in China, the income of farmers increased slowly, and the gap between the city and rural area broadened continuously. To stabilize the rural society and its economy, the central government started a new round reform to the RCCs since 2003, which included providing financial support, enhancing the efficiency of corporate governance, improving operation, and so on. This reform clarified the ownership of RCCs. But because of the consideration of implementing finance control and mitigating financial risks effectively, the provincial governments took the responsibility to manage the RCCs. This leaves problems to the corporate governance structure of the RCCs.Finally, based on the comparative research on the cooperative finance and the rural financial system, this dissertation analyzes the deficiencies lie in China's RCCs and rural financial system, and conceives to establish modern rural financial system in China, and also provides suggestions to deepen the RCCs'reform. In the part of international compare, the cooperative finance and rural financial system of USA, France, Japan and India are compared. After the compare, this paper points out the problems existed in China's RCCs, such as, non-clarified property rights and imperfect corporate governance, and so on. As to the construction of rural financial system of China, there are problems as follows, the lack of government's strong support, the high market risks, the lack of financial institutions to support farmers, and agricultural insurance decreasing continuously, and so on. In order to solve these problems, this paper provides the basic framework to establish modern rural financial system: utilizing finance control moderately, obeying market rules, establishing rural financial system with the core of RCCs and participants of commercial banks, policy banks and insurance companies to promote the development of agriculture. Under this framework, this paper also provides policy suggestions to deepen RCCs'reform: to perfect the corporate governance of RCCs, to promote the benign development of cooperative finance, and to reform the provincial RCCs.The contribution of this dissertation is mainly listed below:(1) Putting the research of RCCs'institution change into the background of China's economic re-channel, and combining the finance institution change with China's whole institution change, this dissertation properly explains RCCs'institution change of China.(2) This dissertation brings forward the theory of finance control relatively systematicly and integrally. Because of the particularity of financial industry, the government can control financial resources through finance control to support the economic re-channel. In order to implement finance control, the government will put forward corresponding institutional requests and restricts to the financial institutions, which affects their institution changes essentially. So, finance control is used as an important theoretical instrument to analyze finance institution change in this dissertation.(3) This dissertation analyzes the institution change of RCCs by utilizing the theory of finance control. From 1978 to 1996, the institution change of RCCs is primarily connected to the reform of SOEs. From 1996 to 2003, because of the serious financial situation domestic and abroad, the central government decided to enhance the control to RCCs, and ask the PBoC to manage RCCs to mitigate financial risks. After 2003, because of the broadening gap between the city and rural area, and problems existed in countryside, the government reformed the RCCs, and asked the provincial united cooperatives to manage RCCs. The whole logical analysis framework deepens the understanding to the RCCs'institution change, and provides a new perspective to analyze Cina's finance institution.(4) When analyzing RCCs'institution change, this paper systematically analyzes the features of the property rights, industry management and cooperative finance of each phases, and also summarizes the institution change of RCCs, which enriches this research.(5) The author expresses his thoughts about if the purpose of the RCCs'reform in 2003 realized. One of the purposes of 2003 reform is to clarify the property right. But, in fact, although this reform clarified the property right, the RCCs were managed by provincial government, which led to the separation of ownership and control right. From this point, the property was not clarified, and the reform did not realize its purpose.(6) By utilizing the theory of finance control, this dissertation conceives to establish a market-oriented, moderate finance controlled modern rural financial system, and provides suggestions to deepen RCCs'reform. These suggestions are constructive, and can be taken as references.