Finance Development And Economic Growth In Rural Area

Since the reform and opening up, China has received remarkable achievements in economic construction. With the speeding up paces of urbanization and industrialization, Chinese state economy has been keeping a sustained fast growth, However, the agriculture is backward, the growing rate of agricultural economy has largely fallen behind that of the state and the peasants in china are almost in straitened circumstances. So as to call“Three Rural”issue. Therefore, to solve“Three Rural”issue fundamentally becomes the key to enlarge domestic needs, promote China’s sustained and coordinated development and build a harmonious society. Without the growth in rural economy, agricultural developments, rural prosperity and farmers’richness are impossible and financial support is essential to the growth in rural economy.Financial support for agricultural development and the growth of rural economy issue is a global problem. Just like almost every country will have to go through the“dual structure”phrase, the financial duality also generally exists in some certain period of every country. The profit-driven nature of capital renders it flowing into high-return modern industry from low-return traditional agricultural sectors. Economic duality is bound to lead to financial duality. Without necessary policy intervention by the central government, the financial duality will diminish through a very long process with exorbitant costs, even if it is not impossible to depend on the market itself to repair and perfect.Financial support is the key means for developed countries to supporting native agriculture. All countries are prone to support and protect native agriculture because agricultural production owns natural weakness and agriculture lies on the strategic foundation for national economy. Developed countries, with their abundant economic strength, possess stronger capability of coordinated development. Through providing agriculture with solid financial support and sound social service system, they enhance the competitiveness of domestic agriculture, successfully resolving the issues of agriculture, rural areas and peasants. On the contrary, developing countries, probably because of resource constraints, or because of inappropriate policies, haven’t provided strong financial support for agriculture, resulting in serious agricultural development problems. Thus, learning successful experience from developed countries and some major lessons from developing countries, we can advance the reform of China’s rural financial deepening better and fundamentally solve the“three rural”issue.In order to develop rural economy,since the population scale in rural area is huge, the current major task 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 supports can this task been done. Current situation,however,is that present rural financial system has not yet become a booster of economic development in rural areas, in some respects it restricts development of rural economy and present rural financial institutions has not supported rural economy well, but an endless stream of funds from rural transported to highly profitable industrial and commercial enterprises of towns. 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 most parts of China. Thus, deepening the reform of rural finance and exploring reconstruction of environment conducive to sustainable development of rural financial service system are strategic mechanism and elementary approach for integration between rural and urban, so as for sustainable progress of state economy.With the purpose to address these issues thoroughly, a comprehensive study is conducted in this thesis on rural finance supporting rural economic development in Jiangsu Province on the basis of the analysis of information obtained by investigation on peasants from different area of Jiangsu Province and as well as making an empirical analysis of the relationship between and degree of dependence on rural economic growth and rural finance development through rural economic and finance data from 1990 to 2009 of Jiangsu Province, with a focus on the current status of rural finance and the extent to which it contributes to rural economic development. The existing problems are also explored in this thesis,and some suggestions are provided therein as solving solutions. This thesis includes eight following chapters:Chapter 1 is about introduction and composed of five aspects: background and goals of this study, current researching situation at home and abroad, contents and framework, probable creation, deficits of this thesis and problems needing forwarding research.Chapter 2 is about the study of the theories, reviewing and commenting on the theories of financial development, financial intermediary, agriculture financial development and government’s role definition in agriculture finance.Chapter 3 introduces experience of foreign financial and credit and Enlightenment of reconstruction of financial service system, learning from other’s strong points to offset our weakness and guiding the suggestions of this study.Chapter 4 is about agriculture finance at the backdrop of dual economic structure. Theoretically and empirically analyzing evolution and influence of dual economic structure in China, characteristics of Chinese agriculture finance market and adjustment through support of finance.Chapter 5, Chapter 6 and Chapter 7 are key points of this thesis, respectively making an empirical analysis of the relationship between and degree of dependence on rural economic growth and rural finance development, investigating the current situation of rural financial demand and supply in Jiangsu Province, summarizing the characteristics of rural financial demand and problems existing in main suppliers in rural financial market. Chapter 8 is about the conclusion and policy suggestion.The probable creative features of this thesis:’Firstly, with analysis tools of economics, the thesis has concluded its own views and creative points especially on government’s role definition in agriculture finance and the status of late-model rural financial institutions,emphasizing the irreplaceable role of government’s interference. The ways how to interfere and improve the efficiency are more important. late-model rural financial institutions also plays a very important role in the maturity of rural financial market. Secondly, based on the method of granger causality test and ADF stability test, establishing OLS model and gray correlation analysis model, as well as rural economic and finance data of Jiangsu Province, making an empirical analysis of the relationship between degree of dependence on rural economic growth and rural finance development.Thirdly, investigating the current situation by field survey, so we can analyze with first hand information.Problems that should be researched further:It is necessary to further investigate and research insurance and capital market in rural area, since they have effect on the market especially in some developed area of Jiangsu Province such as Suzhou. Government’s role definition in agriculture finance should be adjusted timely.