Construction And Perfection Of Rural Financial System In Mainland China

Agriculture has long since been fundamental in social stability and people’s livelihood. As an ancient Chinese saying goes,"A well-organized agriculture could bring a settled world". With rapid economic development in China, a traditionally agricultural country, the rural finance has been playing an increasingly crucial role. Thus under the prevalent economic globalization, a sound and well-consolidated rural financial system is bound to facilitate rapid and healthy development of agriculture.Since the Reform and Opening-up, most rural area in mainland China have been showing partial prosperity. However, under dual pressure of domestic as well as international market economy, the rural finance is almost on the verge of bankruptcy and social crises. The settlement of rural finance is crux of the matter, and therefore the thorough reformation of rural financial system is sure to be enforced.Despite the fact that economic and trade communication between mainland and Taiwan has been increasingly deepened, it shows a lack of relevant research on communication of rural financial systems of both sides. For instance, there were only some partial studies with minor length by researchers from mainland, which mainly focused on the comparison of rural financial systems of both sides from a single point of view. And what’s worse, relevant studies on the other side were not found, probably due to regional restriction. As a result, this paper aims to bridge the gap, while delivering references to the current rural financial reform.The general outline is presented as follows:Chapter One, Introduction. This chapter firstly makes a brief overview of research background, the aim as well as significance of the study, and secondly presents its innovative approaches, firmly based on former relevant research.Chapter Two, the rural financial system of the mainland. There are both official and unofficial financial organizations in the mainland, unlike that of Taiwan. In terms of official organizations, national commercial banks have shifted their focus to the larger cities and made loans to larger industries, due to consideration of interests. The agricultural developmental banks have laid emphases on bigger sectors, which formed financial obstacles to the masses. Meanwhile, post-saving banks and rural credit cooperatives are playing a limited role, and with massive deficits of credit cooperatives, the official system has dropped into an awkward situation. On the contrary, the unofficial system has comprised rural cooperative funds, which had been forbidden due to bad management, and existing loan sharks as well as personal private banks, also lacking official supervision. Thus, in terms of official and unofficial finance, this paper makes a comprehensive analysis on both the history and current state of rural financial systems of the mainland. It focuses on the background of economic reform, the process of formation and development of rural financial systems, and some existing problems waiting to be solved.Chapter Three, the rural financial system of Taiwan. Fundamental organizations of this system consists of agricultural treasuries, credit sector of accounting, and credit insurance foundations. The first could be regarded as unofficial rather than governmental, due to the51%co-investment of relevant associations. The second is subordinate of the first, and is responsible for financial integration and consumer loans. The third aims to provide necessary capital to farmers with minor guarantee capabilities. Thus, using the method of qualitative analyses together with quantitative ones, this paper makes a comprehensive introduction of the structure, the development, the current state and the existing problems of rural financial system of Taiwan, and also draws experiences as well as lessons from its development.Chapter Four, Comparison between systems of both mainland China and Taiwan.This chapter firstly makes a detailed comparison between systems of both sides, in terms of economic surroundings, relevant laws, internal structure and governmental interferences. It suggests the general outlines firmly based on the actual situation of mainland China, drawing experiences from that of Taiwan.Chapter Five, The constrution and perfection layout of the mainland rural financial system.In terms of economic surroundings, overall development of urban and rural areas should be made to ensure a rapid and healthy economy; in terms of legal surroundings, particular laws should be set; in terms of governmental action, administrative interferences should be transformed into guiding services; in terms of supervision, non-governmental and media ones should be strengthened; in terms of rural financial organizations, agricultural treasuries and credit insurance foundations should be set up; and in terms of cooperation, acts of coordination between sectors of governmental as well as non-governmental entities should be consolidated.From a practical and objective point of view, this paper puts forward some constructive suggestions to the reform of mainland rural financial system, in terms of concluding experiences of Taiwan.The Taiwan system has been regarded as one of the success of Asian finance, and through comparison of systems of both sides, the Taiwan system will lend substantial importance to the mainland one, in terms of governmental guiding, perfection of relevant laws and building of aid policies.This paper presents some innovative approaches as follows.In terms of choice of subject, relevant documentaries, on comparison of systems of both sides and feasibility of experience exportation from Taiwan to the mainland, were relatively rare and inchoate. And it just provides brand new horizons for the current study.In terms of research viewpoints, this paper leads its way in a comprehensive analyses of Taiwan system as well as comparison between systems of both sides. And what’s more important, this paper introduces the current rural financial system of Taiwan, using a large scale-----in terms of implementation of main financial entities and supervision sectors. It draws further and more detailed explanations of formation, development and perfection of the system ever than before. Finally, the paper puts forward constructive suggestions and draws useful conclusions to the perfection of the mainland system.In terms of thoughts of the author, this paper suggests that total importation of the Taiwan system should not be practical; instead, coordinations of development of urban and rural areas could be well implemented based on experiences from Taiwan. Details are as follows:In terms of legal surroundings, particular laws should be set; in terms of governmental action, administrative interferences should be transformed into guiding services; in terms of rural financial organizations, agricultural treasuries and credit insurance foundations should be set up; and in terms of cooperation, acts of coordination between sectors of governmental as well as non-governmental entities should be consolidated.Principal perspectives:Firstly, this paper concludes the existing problems of rural financial system of the mainland, after analysing its history and development. And as a result, the paper draws conclusions as follows:ⅰ) In terms of economic surroundings, the gap between rural and urban areas is still wide and is increasing widening, resulting in the loss of capitals. ⅱ) Governmental supervision is insufficient and administrative. ⅲ) Some internal problems still exist, for instance, the retardation of rural loans as well as rural financial system managements, the lack of competitive mechanism in rural markets, and the loss of services from rural areas.Secondly, via comprehensive analyses of the Taiwan system, this paper draws conclusions as follows.ⅰ) A healthy economic surrounding proves to be crucial to the development of rural financial system.ⅱ) Governmental guiding services and qualified legislations are solid insurance of healthy development of cooperative finance. ⅲ) Perfection of organizational mechanism proves to be essential to rural financial development.Thirdly, via thorough comparison in terms of economic surroundings, relevant laws, internal system and governmental interferences, this paper draws conclusions as follows. ⅰ) In terms of economic surroundings, the coordination of development of urban and rural areas should be enforced to ensure a healthy economy. ⅱ) In terms of legislation, an independent set of laws particularly about rural finance should be built, and the acceptance and classification of unofficial entities is crucial. Some suitable unofficial entities should be given legal acceptance, and any other methods, such as self-administration, deposit policies, services of "Agriculture, Farmers and Countrysides", should be written and clarified by legal process. ⅲ) In terms of governmental roles, administrative interferences should be decreased and gradually transformed to guiding services. iv) In terms of supervision, non-governmental and media ones should be strengthened. All information on rural markets should be made public. ⅴ) In terms of rural financial organizations, agricultural treasuries and credit insurance foundations should be set up, the rural market-oriented responsibilities of commercial banks should be taken to a wider extent. And the process of agricultural credit cooperatives should be facilitated. ⅵ) In terms of cooperation, acts of coordination between sectors of governmental as well as non-governmental entities should be consolidated.