On The Relationship Between Chinese Rural Financial Development And Urban-Rural Income Gap

This paper bases on the financial perspective of rural to analyze the reason that enlarges China's urban-rural income gap.First, the article reviews and summarizes the previous theories, and then analyses the rural financial problems on the views of supply's and demand's capacity and will in the rural financial market, such as the problems about supply capacity of rural formal finance, outflow of rural funds, credit threshold faced by rural residents, dislocation of the rural financial supply and demand, and development of informal finance and so on. All of those problems are caused by China's imperfect rural financial system, and enlarge the urban-rural income gap by the way of Non-equilibrium effects, economic weakness effect and threshold effect. Finally, through the empirical analysis, the article proves that rural finance and urban-rural income gap exacerbate each other under the current rural financial system.From the above, the paper argues that improving the rural financial system is the necessary condition to develop the rural finance and narrow the income gap. To improve the rural financial system, on one hand, we must reduce the institutional barriers for rural citizen, enhancing the rural demand and the supply will of financial institutions; on the other hand, we need to improve the current rural financial system, strengthening financial supply capacity and meeting the actual financial needs of rural market.