China Agricultural Development Bank Of Reform And Policy Recommendations

China is a large agricultural country. Agriculture plays an important role in the national economy. However, an issue concerning agriculture, countryside and farmers has always restricted a sustainable development of our national economy. Inferiority of agriculture and low income high risk of rural economic obstruct entrance of general commercial financial resources into agricultural sector. Thus, rural economy can not be developed without the support of policy finance. In China, the only state-owned agricultural policy bank is the Agricultural Development Bank of China (ADBC). In fact, ADBC has been established for over a decade. During these years, ADBC plays a significant role in supporting and promoting the development of China's rural economic, purchasing and saling of cotton and edible oil, as well as safeguarding the interests of farmers. Although there were three main changes concerning to business scope of ADBC, it still can not match China's rural economic development for some policy reasons and lacking experience. This is reason that ADBC can not longer perform its duties well in recent years. At the same time, due to its huge losses caused by operational mistakes limited the sustainability of its development and been a financial burden in some ways. Therefore, to be playing a better role of ADBC and follow the guidance of the state scientific development approach, this dissertation is intended to study development history, achievements and operation status of ADBC to identify its current problems. Hopefully, some policy recommendaticns could be found during the analysis and provide useful suggestions.This thesis is divided into four chapters. Among them, the depth reform initiatives of ADBC will be paid more attention.Chapter 1 describes the establishing process of ADBC, the development process of ADBC and its reformation background. This chapter can be divided into three parts. The first part explains establishment background of ADBC by following three documents which are issued by the State Council. The conclusion is that establishment of ADBC could support the development of rural economic with an effective way; moreover it is needed by our financial system. At the beginning of our financial system reforming, it is difficult to distinguish policy-related losses and commercial losses. Because the four major state-owned commercial banks undertake both commercial bank services and policy-oriented financial services. In order to improve the operation capability of state-owned commercial banks and China's financial system, the government decides to separate commercial bank services and policy-oriented financial services of state-owned commercial banks through the establishment of a specialized financial institution which intends to operate policy-oriented financial services. According to changes of business scope, it can be broadly divided into three stages: a single stage of financial development, closed-loop operation funds and comprehensive stage of financial development. A single stage of financial development means at the beginning of establishing ADBC, its business scope not only covers agriculture logistics, but also involves agricultural production. In the medium, the business scope of ADBC has been narrowed for misappropriated funds. The major characteristic is shown by the closed-loop operation funds in food purchasing. On the third phase, according to the needs of rural economic development, business in the first phase are restored, at the same time, ADBC starts self-related business. This is a comprehensive development stage. The third part in this chapter describes the reformation background of ADBC. Although the establishment and development of ADBC advance the progress of agriculture economy, the issue concerning agriculture, countryside and farmers has not been reversed. Furthermore, economy develops slowly in rural areas, income of farmers is not high, and production environment of agricultural is still not well improved. Especially in the environment of original policy-oriented financial mechanism hardly adapting to new circumstances, policy-oriented financial system will start immediately and restructuring of ADBC is just a matter of timeChapter 2 describes the achievements of ADBC during its development process and the importance of ADBC. The major roles of ADBC are shown as follows:making sure there are enough funds to support purchasing and saling of cotton and edible oil; safeguarding the interests of farmers; supporting agricultural development and restructuring the cotton and oil enterprise; being a major tool for operating our macro economy. Therefore, ADBC played an important role which can not be substituted in the area of implementation of agricultural policies, providing a stable source of funding for agricultural development; ensuring national food security; protecting the interests of farmers and promoting agricultural and rural economic development. Although ADBC did not very well in supporting rural economic development, we could not ignore the necessity of existence of ADBC which is the only state-owned agricultural policy bank in China. The existence of ADBC is not only supported by economic theory, but also supported by demand of practice. Low income with high risk cause it is hard to attract commercial financial resources into rural economy. These characteristics determine financial funds which are provided by ADBC must be treated like a public goods. In addition, the environment condition of agriculture in China is weak. Agriculture results depend too much on weather. Nowadays, the development of rural economy has become to a bottleneck of our national economy. Thus, building a new socialist countryside in China, increasing famers'income, improving agricultural production conditions are inseparable from the supporting of ADBC.Chapter 3 describes the current problems of ADBC and analyzes reasons of problems which are mentioned. Following are the problems which are exposure during development process of ADBC:its function is not clear; regulatory framework is not reasonable; internal management system is not well; operating system is not perfect. Specifically:(1) Its function is not clear:lacking legal status; policy-related business focused on a single field and the volume of business is not such large; businesses can not much rural economy; (2) regulatory framework is not reasonable:lack of regulations; framework of regulatory institutional is unreasonable; (3) internal management system is not well:lacking internal control system; institutional settings and administration of staffing are not flexible; incentive and restrictive mechanism design is unreasonable; (4) operating system is not perfect:credit quality is poor; capital is not enough; risk compensation mechanisms and subsidy mechanism is not well; funds sources is not wide. There are two reasons one is from national policy and the other is from ADBC's own. ADBC operates policy-related businesses which are mainly concentrated on agriculture-related field. Its risk is hard to be diversified. In addition, it is not clear to operate policed-related business under financial environment and not clear to realize role, responsibilities, scope of ADBC. All those cause ADBC's current problems.Chapter 4 describes policy recommendations on restructuring of ADBC. This section includes:sticking to the characteristics of policy-related financial; accelerating financial legislation and improving the regulatory system; establishing a highly efficient operating mechanism; establishing a risk compensation mechanism and improving the subsidy mechanism. Specifically:(1) sticking to the characteristics of policy-related financial:making a clear position of ADBC; separating different types of businesses; expanding scope of existing policy-related businesses; exploring new policy-related businesses; (2) accelerating financial legislation and improving the regulatory system:promulgating financial regulations; making our financial supervision refinement; (3) establishing a highly efficient operating mechanism:to strengthen risk management and establish a sound risk control mechanism; establishing a scientific performance evaluation mechanism and combine the interests of the government, enterprises and workers; building a well organized internal control system; introducing modern banking management mechanism; (4) establishing a risk compensation mechanism and improving the subsidy mechanism:providing some necessary financial subsidies and support from the perspective of the government; improving capital compensation mechanism; expanding financing methods; broadening and improving the existing ways of operating funds. Finally, some property policy recommendations would be found though analysis of development process, achievements and operation status and current problems of ADBC. Hopefully, this dissertation could be useful for the future reformation of ADBC.