The China’s Rural Financial Intermediation Development And Of The Relationship Between Rural Economic Growth

In China rural economy is the foundation for the stable development of the national economy. The development of rural economy functional needs financial support and related financial services provided by rural financial intermediaries. With the rural financial reforms, problems that rural financial intermediaries of China can not meet what rural economic development needs have been becoming more and more highlighted. Commercial banks reduce their business in rural areas. Nonagricultural trend of rural credit cooperatives is worsening. The role of policy-oriented banks is minimal. China Postal Savings has accelerated the loss of rural capital. The development of agricultural insurance is seriously lagging behind. These problems lead to the result that the rural economy can not get enough financial support from the financial intermediation and be seriously restricted.Starting with the analysis on the status of China’s rural financial intermediation and rural economy, this paper wants to reveal problems of the rural financial intermediation in China, and make corresponding policy recommendations, through analyzing on the relationship between China’s rural financial intermediation and rural economic growth, by the method of theoretical researching and empirical testing. In this paper, theoretical analysis and empirical analysis is combined. It takes use of the theory and research methods which belong to finance, macroeconomics and econometrics. It also focuses on the combination of quantitative analysis and qualitative analysis and the combination of theoretical analysis and empirical study. The study also uses cointegration test, Granger causality test as measurement methods. It tries to study new perspective on clear ideas and use scientific research methods.The paper is divided into three parts:Part one. The paper defines the rural financial intermediation in China firstly, and reveals the path how the financial intermediation affects the economic growth starting with the endogenous growth model. And then it expounds theoretically the mechanism in which the development of financial intermediation impacts the economic growth. Part two. The paper analyzes the status of rural financial intermediation development and the practical issues of rural economic development in China by combining the qualitative method and quantitative one, starting with the rural financial reality of China. Firstly it designs indicators of rural financial intermediation development from three different angles, including the scale indicator(RFIS), the efficiency indicator(RFIE), the structure indicator(RFIT). Secondly the paper tests the relationship between the rural financial intermediation and the rural economic growth using cointegration test and Granger causality test. Finally, it finds that the scale and efficiency of rural financial intermediation has hampered the growth of rural economy in China, and that the development of rural credit cooperatives and the growth of rural economy is related to cointegration relationship, which proves the monopoly position rural credit cooperatives has gotten. But there are still many problems with Chinese rural credit cooperatives themselves. Part three. The paper analyzes comparatively the operation of the rural financial intermediaries in major western countries. And then it proposes to optimize the function of China’s rural financial intermediation and carry out in-depth reforms on rural finance in China in order to promoting the rapid and healthy development of china’s rural economy.