Research On The Balancing Of Dual Goals Of China's Rural Financial Institutions

Our government has paid increasing attention to agriculture, rural areas and farmers. Recently, besides fiscal policies, the government takes financial measures frequently to deal with the three dimensional rural issues. However, China's rural financial institutions have faced the both problems of achieving policy goals and sustainable development in reality. In order to analyze the causes deeply and findsolutions, this thesis has studied the balancing of dual goals of China's rural financial institutions.By analyzing concerned literatures, firstly, this study gives definitions of dual goals and balancing of dual goals,and then describes related theoretical basis and the reasons why China's rural financial institutions should balance the dual goals. Secondly, by using the research data of the Center for Studies of China Western Economic Development, this study makes empirical analysis on social goals and economic goals of China's rural financial institutions respectively. In the empirical analysis of realization of social goals, part one examines the poverty alleviation effect of agriculture loans by using the survey data of western 11 provinces and the methods of Logit model and Propensity Score Method. And the results show that commercial agriculture loans have a negative effect on the poor; conversely, they have a positive effect on the non-poor. In addition, whether farmers can get loans or not is mainly determined by educational background, political relationships, family scale and loandemand. Accordingly, the policy recommendations are including two aspects which are the implementation of the targeted financial poverty alleviation policy and the enhancement of the ability of farmers to obtain loans. Part two is the analysis of agricultural loans' supporting efficiency. By Using statistic data of seven rural financial institutions from 2006-2013 and the method of DEA-Malmquist Index, the results show that agricultural supporting efficiency of China's rural financial institutions is gradually improving but lack of stability, so there is still a long way to go. Besides, different rural financial institutions show different levels of agricultural supporting efficiency, so every institution should make improvement based on their own situation. In the empirical analysis of realization of economic goals, this study takes the rural credit cooperative, which is the most representative rural financial institution, as an example. The results show that for most rural credit cooperatives, the profit efficiency is only in the middle-upper position, which is less competitive comparing to commercial banks, while the overall level of the rural credit cooperative's cost efficiency is high. The common factors which influence profit efficiency and cost efficiency are property right systems, core capital adequacy, deposit-to-loan ratio, fiscal expenditure ratio and regional per capita GDP. Thirdly, this study gives evaluation analysis of the balancing of dual goals of China's rural financial institutions from the perspectives of institutions and household. And the results show that the imbalance of the dual goals does exist in a certain degree. Then this study explores the reasons and generating mechanism of the imbalance of dual goals of China's rural financial institutions theoretically. Lastly, this study references the foreign successful balancing experiences for study.According to the resesrch above, this study makes the following proposals on how to balance the dual goals in China:(1) Positioning government's role reasonable, which includes reducing government administrative intervention, creating a good external market environment,implementing targeted financial poverty alleviation policy and improvingthe risk prevention and solution mechanism in rural financial market. (2) Increasing financial supply in rural areas, which includes establishing a moderately competitive rural financial market system, perfecting micro credit market and cultivating and developing rural cooperative finance. (3) Creating financial demand in rural areas, which includesincreasing farmers' financial demand and innovating financial products and servicessuitable for rural market. (4) Paying great attention to quantitive reforms, and cultivating new emerging market forces.The innovation of this study mainly touches upon the following aspects:(1) This study gives definitions of dual goals of rural financial institutions. So far, both government departments and academic circles haven't given a clear definition of what goals should rural financial institutions achieve. There are kinds of different statements, such as "policy goals and commercial goals", "social responsibilities and economic interests", "financial sustainable goals and agricultural credit goals", "social benefits and self benefits", and so on.The fuzzy definition is not conducive to the supervision and evaluation of the social and economic performance of rural financial institutions.Based on the existing research,this study tries to define the dual goals China's rural financial institutions face as social goals and economic goals, and tries to give the concrete meaning of social goals, economic goals and the balancing of dual goals.(2) In the empirical analysis of the balancing of dual goals of rural financial institutions in China, the study has some innovations in research methods.First, in the analysis ofthe poverty alleviationeffect of agriculture loans of rural financial institutions, the study uses Propensity Score Matching method, which is approximate to natural randomized trials and is able to avoid the endogenous problems. By comparative research of the poverty alleviation effects of agriculture loans for the poor and the non-poor, the results show that the differences should be paid attention to, especially for financial policies which aim at eliminating poverty. Second, in the empirical analysis of realization of economic goals of the rural financial institutions, after considering financial indicators and non-financial indicators integratedly, this study uses stochastic frontier analysis method to analyzeprofit efficiency and cost efficiency.(3) This studybuilds a theoretical model to analyze the internal mechanism of the imbalance of the dual goals. And three game models interpret three problems respectively:first, to serve the three dimensional rural issues is the policy mission of rural financial institutions; second, under the government intervention, the optimal choice of the rural financial institution is different in different periods; third, imbalance causes high non-performing loan ratio and capital outflows. The conclusions above can make a good interpretation of the historical trajectory of financial institutions'establishment and development in Chinese rural financial market, which also can make supplement to existing researches in some degree.