Research On The Alienation And The Regression Of Chinese Rural Cooperative Finance

Since the implementation of the policies of reform and opening-up to the outsideworld, the Chinese rural economy has obtained the rapid development. The total outputvalue of agriculture was below10%of China’s GDP in2013and it symbolized thatChinese agriculture is in a crucial stage of modernization and is in front of the “MiddleIncome Trap”. How to go beyond the trap highly depends on vigorously promoting theconstruction of the rural urbanization, transferring huge rural labors, supporting the morespecialized farming household and family farms. The income gap between the urbanand the rural residents was still treble. Obviously, only depends on the rural residentsincome cannot fulfill the capital needs of the rural economy development, the ruraleconomy development is facing a huge capital shortage. For about11years, the centralNO.1documents were all concerned about the agriculture, which can well told theextremely importance of the rural problems. Three Rural Issues are about problems of thesurvival, the sufficiency of food and clothing and moderately high standard of living of1billion farmers, problems of the rural economy and the public stability. Without thewealth being of the farmers, China has no richness, without stability of rural areas, Chinahas no stability.The practice of rural finance development in foreign countries pointed out thecooperative finance is the most important element of rural finance system, compoundingwith the policy finance to firm a core and main parts of rural finance system, and thecommercial finance is only a supplement to them, the three together build up a stablethree-dimensional financial structure. However, since2003, the Chinese ruralcooperative credit unions started a new round of cooperative finance reform, and formeda rural finance system contains the rural credit unions, the rural cooperative banks andthe rural commercial banks. Strictly to say, Chinese rural credit unions has accomplishedthe shareholding reform, from the cooperative rules and regulations bases to theshareholding system, qualify stocks changed into investment stocks, that is, in reality,Chinese rural credit unions are commercial banks, Chinese rural finance system only hasone pattern as the commercial finance, the cooperative finance alienated and the policy finance is weakened and even alienated. The hobbling rural finance system is unstableand is facing fierce troubles. That is why the central NO.1document pointed out todevelop new style of rural cooperative finance institutions. It deepened the awareness ofthe rural problems, although the government can enforce to perish the cooperativefinance institutions, can change the nature of the credit unions, but the deeply social andeconomic root for the cooperative finance existence cannot changed, the general rules ofcooperative finance development cannot changed. Therefore, it is crucial to rebuild anddevelop the rural cooperative finance.The first chapter is introduction, this chapter carefully reviewed the literature aboutthe cooperative finance theories both in domestic and overseas and pointed out thecooperative finance is one of the three basic elements of finance system. Then went on toreview the alienation and the regression of Chinese rural cooperative finance literature,there were two different opinions about the alienation of Chinese rural cooperativefinance, agree or disagree to it. This dissertation was strictly against the alienation ofChinese rural cooperative finance and also pointed out that the rural cooperative financeshould regress to its cooperative nature.The second chapter is the overview of the three-dimensional financial theory.Three-dimensional financial theory was generated and illustrated by Professor BaiQinxian, the Chinese famous senior financial economist. Three-dimensional financialtheory creatively put the cooperative finance together with the commercial finance andthe policy finance as parallelized three financial sectors, upon this to build up a interconnection, interlinked, interaction and interwovenness three dimensional financestructure with superb stability. It sublimated the awareness of finance basic theory andit is a huge innovation to the finance basic theory as well. In every country’s ruralfinance system, the cooperative finance is indispensible and irreplaceable, especially inChina, therefore, we must pay attention to rebuild Chinese rural cooperative finance.The third chapter analyzed the alienation of Chinese rural cooperative finance andthe severe consequences of it. The definition of the alienation pointed out that thecooperative nature was drifted and became commercialization and marketization， alsocan put this way, the cooperative finance became commercial finance. Its main featureswere equity share capitalization, management centralization, business mercerization, profit driven and elitism rather than plebification. The rural cooperative financechanged to commercial finance from the pattern of the equity, the regulations of themanagement, the business operations, the purpose of the service and the service targets，full of the natures of commercial finance. However, after the alienation, it alsogenerated extremely bad effects, for instance, rural finance structure heavily imbalanced,the shortness of the functions of the rural cooperative finance, severely destructive threedimensional finance structure and also restricted the sustainable development of Chineserural economy and society.The fourth chapter analyzed reasons of the alienation of Chinese rural cooperativefinance. There were plenty reasons caused the alienation, from the qualitative analysis,the main reason was lack of the spirit of the cooperative, worsen of the financial ecologyof Chinese rural area and government-run instead of civilian-run weaken the nature ofcooperative. From the institutional evolution analysis, the management system disorderlychanges made the puzzle of interest game and principal-agent dilemma between thecentral government and the local government even worse, and put Chinese economy andfinance system reforms generated path dependence which drove Chinese ruralcooperative finance to became commercial finance on top all made the alienation. Fromthe modeling analysis, through setting up the principal-agent model and the pathdependence model to prove these two issues were the fundamental reasons of thealienation. From the theoretical analysis, the root reason of the alienation was lack ofinnovation of the theory and short of knowledge of it. For quite a long period, Chineseacademics only pay attention to the commercial finance and ignore the cooperativefinance, never think from three-dimensional financial structure perspective to understandcooperative finance. The ignorance of the extremely importance of cooperative financeshowed out in practice was the denaturation and the alienation of the Chinese ruralcooperative finance.The fifth chapter is the inspirations of cooperative finance in typical countries forthe regression of Chinese rural cooperative finnace. This chapter analyzed the ruralfinance system of Germany, France, The United States and Japan and found out thesecountries attached great importance to set up consummate three dimensional financestructure, this brought useful inspiration to China as to put the cooperative finance as the core to the rural three-dimensional financial system, together with the policy finance toform the core and main parts of the rural finance system, therefore, we have to build alocal-central multilevel completed cooperative finance system.The sixth chapter is the path design for the regression of Chinese rural cooperativefinance. Upon the above analysis of the alienation of Chinese rural cooperative financeand the reasons of it, carefully chose quotable experiences, China has to rebuild the ruralcooperative finance system, we should stick to the principal that “new build new style,old ones let them be” to think about the top-level design and to choose the most suitablepattern for Chinese rural cooperative finance system, in order to realize the regression ofChinese rural cooperative finance.The last chapter is the policy suggestions for the regression of Chinese ruralcooperative finance. To achieve the regression of Chinese rural cooperative finance, aperfect rural three-dimensional financial structure was needed, we need to build new typerural cooperative finance institutions, to give full play the basic role of the market in ruralcooperative finance resource allocation, to optimize the economic and financialenvironment of the rural area, improve the credit guarantee and the loss compensationmechanism of rural cooperative finance，to strengthen the support, propaganda andtraining progress about rural cooperative finance, step by step, with pertinence to realizethe regression of Chinese rural cooperative finance.The innovations of this dissertation are as below:(1) to adopt three-dimensionalfinancial theory linking through the whole texts, to take the whole situation into accountand to think about the alienation and the regression of Chinese rural cooperative finance;(2) to summarize the appearances of the alienations of Chinese rural cooperative finance,such as, equity share capitalization, management centralization, business mercerization,profit driven and elitism rather than plebification. The cooperative nature was driftedand became commercialization and marketization;(3) to analyze reasons of thealienation of Chinese rural cooperative finance from different perspectives and multilayer,through setting up the principal-agent model and the path dependence model to provethese two issues were the fundamental reasons of the alienation. From the theoreticalanalysis, the root reason of the alienation was lack of innovation of the theory and shortof knowledge of it;(4) to review the typical countries rural finance systems by the three dimensional finance structure, summarizing different rural cooperative finance patternsof each country, the Pyramid style of Germany, the up-down style of France, themulti-compounding style of the United States and the affiliated style of Japan in order togive inspirations to the regression of Chinese rural cooperative finance. Because of theimperfect knowledge structure and the low level of the theory mastered by the authorgenerated this dissertation certain weaknesses, such as the research was mainly done bysecondary materials and the knowledge needs to be broaden, this also means the improvespace and leading direction from now on.