China's Rural Financial System Innovations And Required Institutional Arrangements In The Transition Period

China is a developing country with a typical rural-urban dual economic structure, huge-scaled agriculture of low quality, vast rural areas economically underdeveloped, and a large agricultural population generally with low income. How to promote rural development and increase the income of rural residents has remained an exceptionally important topic for Chinese theory researchers, policy makers and practitioners. This dissertation attempts to analyze the problems with China's rural financial system, and to discuss innovations in the rural financial system and the entailed institutional arrangments in the transition period for the purpose of enhancing the role of rural finance in rural economic development to achieve favorable interactions between development of the rural financial system and rural economic growth.The dissertation is composed of 9 chapters. Chapter 1 is an introduction and chapter 9 the conclusion. Chapter 2-8 make up the body of the dissertation. Chapter 2 reviews the literature in rural finance from both at home abroad, Chapter 3 concisely presents, outlines the main features of and draw conclusions from rural financial systems of both developing and developed countries, Chapter 4, after building an econometric model, analyzes the relationship between rural economic growth and rural financial development in Chin, Chapter 5, with a quantitative and qualitative description of the current developments of the rural financial system, elaborates its major problems. Chapter 6 proposes an overall framework for innovating and redesigning China's rural financial system. Chapter 7 recommends some indispensable macroscopic and microscopic institutional guarantees for innovating in and redesigning China's rural financial system. Chapter 8 discusses the latest developments of China's rural financial institutions, identifies the advantages of some new rural financial institutions and analyzes the problems with their further development. Then the basic orientation of the development of rural financial institutions is discussed and some basic principles that should be followed. On the whole, this dissertation has followed the general research logic of "identifying the problem, reviewing literature, analyzing problems and recommending solutions", which has ensured the dissertation to be of systematic, in-depth and scientific research and analysis, and be pragmatic value. The gist of each of the 7 major chapters is as follows:Chapter 2, as the beginning and basis of this thesis, reviews the rural financial study systematically. There are three periods in the historical evolution of the rural financial study, which are agriculture credit subsidy theory, rural financial market theory, and imperfect competition market theory. Based on the three theories, Many domestic and foreign researchers have further explored the rural financial theories, which includ rural financial system, the relationships between economy growth and finance development, financial restraint, financial structure, financial function and financial efficiency, and so on. But the study on the rural finance for the developing countries, especially for China, isn't systematic and in-depth enough, such as the study on the innovations and institutional arrangement of the rural financial system, which is the study focus of this thesis.Chapter 3 summarizes the practices and features of the rural financial system in the developing and developed countries from the global angle. This chapter chooses the USA, France, German and Japan from the developed countries, India and Thailand from the developing countries as samples to introduce in detail the evolution, institutional construction, institutional function and performance in their rural finance. Whatever developing or developed countries, we discover the facts from the interviews that the countries have set up government-oriented rural financial systems, which are composed of rural policy finance, rural cooperative finance and rural commercial banks. Those systems provide enough financial services and supports for agricultural development, rural construction and raising the farmers'income through financial measures.Chapter 4 empirically analyzes the relationship between rural economic growth and financial development with the econometric models under current rural financial framework of China. Firstly, the literatures on the relationship between financial development and economic growth are reviewed from the empirical perspective. Secondly, structural models and three tri-variable VAR models are developed to examine the relationship between financial development and rural economic growth, and the rural financial system evolution of China is also analyzed. Our VAR models incorporating aggregate agriculture (including farming, forestry, animal husbandry and fishery) shows there isn't long-term equilibrium relationship between rural financial development and economic growth, and a negative nexus between rural loan and comprehensive agriculture, therefore China's rural finance didn't improve the growth of agriculture since Chin's reform and openness. But China's indirect rural finance services (the loans to the town-village enterprises) play an important role in the growth of rural economy. In addition, farmers' incomes per capita also didn't benefit from the rural financial development. These empirical studies are meaningful for the practice and show it is necessary to quicken the reform of the rural financial systems.Chapter 5 analyzes the institutional components, service structure, agricultural finance service of China's rural financial system. Based on the previous studies, we further analyze the problems facing the rural financial service and rural financial institutions. Our statistic data show Agricultural Bank of China and rural credit cooperatives are the main source of rural finance, specially, the latter is more. Accordingly, the reform of these organizations will influence the fundamental courses of China's rural finance.Chapter 6 examines the problems existing in process of building China's rural financial organized system. Based on the present three relevant paradigms, namely financial institutional paradigm, financial function paradigm, financial institution paradigm and financial innovation paradigm, and through the contrast of three theories, we argue that in the transition period, there are the rapid changes in china financial environment and frequent adjustments in financial institutions, and it is more feasible to build rural financial system from the "functional paradigm ", which also can provide more stable and enduring reference frame for the deeper analysis of problem, In view of function paradigm, the thesis carries out the objective analysis on the demand characteristics in current China's rural finance and satisfaction degree,and goes further to find out the effective and restrictive factors. On the basis of these, with the current situation and trend of rural finance, the thesis discusses entirely the whole design and innovation of China's rural financial system, taking finance "functional view" as the theoretical basis and following the design route "external environment-function-performance" Chapter 7 focuses on the function of the micro-institutional arrangement which includes market orientation, capital structure, governance structure, risk management, financial supervision, etc. and the macro-institutional arrangements which cover government function, fiscal subsidies, centre bank's support, preferential tariff, credit building ect. in construction and innovation of China's rural financial organized system, In addition, the author proposes the practical measurements and views that only the effective micro-systematic and macro-systematic arrangements combine with each other,can innovation 1f China's rural financial system be kept sustainable development and what's more important, micro-systematic arrangements play a fundamental role in China's rural financial system.Chapter 8 investigates the evolution of setting up new financial institution in the rural area since CBRC loosens the critera of acess of financial institution in the rural area, including micro-credit company, town-village bank, credit company and rural financial reciprocal community. And the chapter takes the rural financial reciprocal community in Siping city of Jilin Province as a case to show the advantages and problems of new financial institutions in the rural areas.The dissertation examines the academic, practical and operating problems concerned with China's rural financial system innovations and institutional arrangement relatively in detail. Different from previous studies, the following innovations are made in the dissertation.1. The dissertation introduces and reviews rural financial theory and rural financial system which is operating in some countries in detail. Not only can this work deepen our understanding on rural finance, but also set a sound base for future studies. We show the direction for our academic theory and advice of policy by introducing rural financial theory and reviewing the practices. These works are valuable for the dissertation.2. The dissertation describes and analyses the environment, characteristics of institutions, aggregation, traits and problems on the rural finance of China. We use much data to reflect the tendency, characteristics, relationship among different indexes in China's rural finance. The works can prove a good base for the econometric analysis and policy advices empirically.3. The dissertation use multi-variable econometric modes to analyze the relationship between the rural financial development and the growth of rural economy. Different from the previous studies, the dissertation developed structural models and three tri-variable VAR models to examine the relationship between financial development and rural economic growth, and the rural financial system evolution in China is also analyzed. Our VAR models incorporating Comprehensive agriculture (including farming, forestry, animal husbandry and fishery) shows there isn't long-term equilibrium relationship between rural financial development and economic growth, and a negative nexus between rural loan and comprehensive agriculture, therefore China's rural finance didn't improve the growth of agriculture since Chin's reform and openness. These empirical studies are meaningful for the practice and show it is urgent to quicken the reform of the rural financial systems and its goal.4. The dissertation thoroughly expounds the necessity, possibility and potential performance of China's rural financial system innovations from the academic and practical perspective, and argues that the system innovations should be based on the "functional paradigm, and abide by a routine like "External environment-Function-Institution-Performance ", and analyze the whole design and innovation of China's rural system.