A Study On Institutional Arrangements Of Informal Finance During Rural Urbanization Process In China

China's economic construction has developed quickly since the economic reform in 1978, all the residents in China had a better life with higher income. But in the same time, there are also many serious social problems. One of these problems is the gap between urban and rural areas. It becomes an obstacle in the harmonious social development. To solve these problems, our government set up some policies about how to establish a new countryside. Establishing a new countryside means building a prosperous, affluent, democratic, civilized and harmonious modern countryside. We should promote the process of rural urbanization and finally make the countries become towns and cities. While in the process of rural urbanization, it needs a large amount of capital. In the current condition of lacking the government's financial support and the insufficiency of formal financial credit support, China's rural urbanization process needs new investment resource urgently.At the same time, there is widespread informal finance in the countryside with a huge scale and diverse forms. It has played a very important role in the development of rural economy for a long time. In such circumstances, it is a potential way to introduce the informal finance into rural urbanization process. In this article, I analyzed why it is necessary to introduce the informal finance into rural urbanization process. I also analyzed some possible ways to make better use of informal finance in the rural urbanization process. That is a win-win solution which can not only accelerate the rural urbanization process, but also make the informal finance itself stronger and better.As some external institutional restricts and some internal negative effects of informal finance itself, this article also made some policy recommendations and institutional arrangements from both the external and internal aspects. We should not only make some improvements about the informal finance itself, but also make some appropriate institutional arrangements from the external circumstance, especially the confirmation of the law and government. By these policies, informal finance can be made effective use in the rural urbanization process. Furthermore, introducing the informal finance into rural urbanization can accelerate this process greatly.