A Study On The Theory And Practice Of Chinese Rural Financial Development

Agriculture is the foundation of the national economy. Since reform andopening-up, China has established new relations of production in rural areas. Ruraleconomy has been made great strides. But there are also some problems along with it.Compared with other industries, rural economy and incomes have taken “grow at lowspeed” after rapid economic growth economic in a short term, and results in widerural and urban income gap. Slow rural economic development and low per-capitaincome have been the key factors retarding the economic growth and building of aharmonious society in an all-round way. To solve the problems of agriculture, ruralareas, and peasants and to build new socialist countryside must forcefully and fullydevelop rural economy in China. Based upon the history and analysis of the status ofChinese rural financial development, the paper aims to probe into the very measuresfor the economic development in rural areas and the model of helping to increaserural incomes.Firstly, the paper reviews the correlative theory about rural financialdevelopment and makes a summary of the main arguments about this. Based on thesummary of the mainstreams in academic world, rural finance structure can bedefined as formal and informal finance. After reviewing the process of evolution offormal and informal finance in China, the author try to test the reciprocity of ruralformal finance, informal finance and rural economic growth, increasing of ruralincomes through econometric empirical method. Then through the survey of the ruralfinancial market in Fujian Province, Chinese rural financial market supply anddemand of the present situation and based on these factors, to analysis the cause ofpresent situation of Chinese rural financial market. Finally, based on the experience of foreign countries rural financial development, and the status quo of Chinese ruralfinancial market, the article puts forward several policies and suggestions. Apart fromthe introduction, the body text is divided into seven chapters, and the main contentsare as following.Chapter1A brief introduction to the theory of rural financial development andrelated documents. This part starts from the related theory of financial development,and sketches the development progress of financial development theory and mainpoints and summarizes interrelations between financial development and economicgrowth, which will be made to support rural financial development theory. And thenillustrates the main rural financial development theory and policy. The author makesvery comprehensive document comment about the main points of since the1990srural financial development and rural economic growth from the selection of ruralfinancial management system, the financing channel selection of rural financialmarket and rural financial organizations. By above analysis, the author notices thatthree problems must be posed here. First, scholars adopt the single demonstrativemethod in the empirical study, yet lacking of inductive deductive method. Second,there is few empirical documents on the correlation between rural finance andpeasants income, especially for the effect of rural informal finance. Third, there is lessresearch on the rural informal finance crime, and it is too optional for the selection ofa suitable sample for study, which can provided the certain basis for the furtherresearch.Chapter2The development course of China rural finance. This chapter firstlysummarizes the rural finance defined by the scholar of Song Donglin, who dividedinto rural formal finance and rural informal finance. Then from the viewpoint ofhistory, analysis both the development course of rural formal finance and ruralinformal finance, and summarizes the function to rural economic and existingproblems. By above analysis, the author finds that two problems. First, owing to economic system transformation and the historical function of rural financialorganizations, Problems also exist in Chinese rural formal finance, includinginsufficient and simple business, which cause the rural credit supply seriouslyinsufficient and rural financial repression. Second, although china rural informalfinance fills in the blank spaces of formal finance, existing loan interest rates,financial risks, which restricts the economic development in rural areas.Chapter3A theory and empirical analysis to rural financial development andrural economical increasing and the income of peasants. This chapter firstlyintroduces finance affect transmission mechanism of economic growth model and aninversed "U" pattern relationship was found between financial development andincome. On this basis, make dialectical analysis to the relation between the two fromthe perspective of theory. Combining with theoretical analysis, gather national dataand regional data (Fujian Province data) respectively. Create a new model by varyingCobb-Douglas production function. Then adopt principle component analysis, whichis of the pluralistic statistical analysis, and co-integration analysis of time serial,Granger causality test, IRF model to test the correlation between rural finance andrural economy and rural incomes. Through the empirical test, it shows that ruraltraditional formal finance is the first main component of rural formal finance.However, rural formal finance plays a negative role in rural economy. There isfinancial repression in rural areas. Rural informal finance accelerates the growth ofrural economy to a certain extent, but too limited.Chapter4The investigation and analysis of rural financial market. The authormade a survey of financial market at the main counties of Fujian Province. By aboveanalysis, the author notices that it is too optional for the selection of a suitable samplefor study and without making the analysis by econometrics methods. In this chapter,the author uses the cluster analysis of multivariate statistical analysis, classified themain cities and counties in Fujian. And then choose some typical areas (Jinjiang City, Lianjiang Country, Changting Country, Shunchang Country) as the investigationsamplings. The main conclusions are drawn as follows:(1) There is general financialrepression in the countryside.(2)Informal finance plays a leading role in ruralfinancial system, and rural underground finance is quite active.(3)It is too significantfor regional differences of financial activity of peasants. And rural financialrepression is more serious in under-developed regions.Chapter5The cause of the present situation of Chinese rural financial market.Based on the conclusions of first two chapters, the author thinks that:(1) The cause ofthe present situation of Chinese rural formal financial repression are mainly absenceof functional finance subject, lack of rural financial innovation and influential factorof rural credit. Dual economic model and strategy is the systematical cause of ruralformal financial repression.(2) The empirical results suggest that rural informalfinance plays a leading and positive role, which is due mainly to rural informalfinance can overcome information asymmetry and squeeze out formal finance.(3)TheSurvey shows that rural underground finance is quite active, which is chiefly becauserural informal finance has the merits as following: flexible financing model,large-scale financing and the vacancy of national financial supervision and so on.(4)Rural informal finance accelerates the growth of rural economy to a certain extent,but too limited, which is mainly because higher financing cost of rural informalfinance, lower credit quota and negative effects of itself.(5) Difference of ruraleconomic growth is the major reason that rural financial repression is more serious inunder-developed regions.Chapter6The experience and enlightenment which rural financial developmentat abroad bring us. This part presents the experience of foreign countries through ruralformal and informal finance and rural financial innovation, furthermore, reveal theenlightenment to Chinese rural financial development.Chapter7Deepen the rural financial development. This part mainly aims to the result analysis of chapter3and4and the cause analysis of chapter5. On this basis, thearticle puts forward suggestions for prompting Chinese rural financial development.