System And Its Innovation Of Farmer's Cooperative Economic Organization

For so long a time, China's small-scale agricultural production cannot meet the need of the development of the market,in which farmers are too weak to be able to increase their income or to protect their own legal rights and interests. To resolve this problem, the Central Committee of the Party in the Third Plenaryof the 16th Session proposed a support of all kinds of specialized rural cooperative organiztions in accordance with the voluntary and democratic principles.Again in the fifth plenary, it was made clear to encourage the development of various forms of farmer's specialized cooperative economic organizations(FSCEO) in rural areas. Therefore, the study of the specialized cooperative economic organization system is of theoretical and practical importance.Since the reform in 1978, what dominates agriculture in China is the household contract responsibility system, which is charaterized by the buyer's monopoly in the agricultural product market and the seller's monopoly in the productive means market. Besides, Separate households are unable to carry out large-scale production or extend the agricultural production chain to share the processing profit. Therefore, there is great demand among farmers for the systematic innovation of the specialized rural cooperative organiztions.In recent years, the government has been tirelessly committed to the systems of the FSCEO. But on the whole, the supply of systems to the FSCEO in China is inadequate. For example, systems in property right, interest distribution and governance structure are defective; laws, policies and other formal systems lag behind the practice. These problems impose serious constraints on the growth and development of the FSCEO, making its operation quite ineffective. So, to improve this situation, institutional innovation must be made from the following aspects:To implement the equity-subdivision system,so that different equity may share different rights and interests in the FSCEO.The qualification equity ensures its holders lawful qualification and the right of enjoying favourable service from the FSCEO. The investment equify is for the purpose of return on capital rather than to obtain qualifications. The donation equity holders enjoy no interest distribution right nor the right to vote in the FSCEO because it is endowed by the government, social organizations, the collective economy, and individuals to support the development of the FSCEO.To innovate the distribution system. Firstly, to establish a mechanism of re-distribution.That is, in addition to equity dividends, the FSCEO should distribute part of its profit (the specific proportion should be decided byt he General Assembly) to its members according to their transaction or trading volume at the end of the year. Secondly, to implement the system of bonus for the qualification equity. When there is surplus, the FSCEO should distribute bonus to qualification equity in the light of the interest rate paid on bank deposits. Thirdly, to change the order of surplus distribution. Investment equity may be ranked in the first place in the ditribution order, and its dividend per share may be higher than that for qualification equity holders. To innovate the internal governance structure. First, a clear distinction in right, responsibility and interests among the FSCEO's general assembly, the council and the board of supervisors should by made. Secondly, to implement the system of "additional rights with additional conditions", a system that additional right to vote should be limited to those eligible voters with additional conditions, to prevent the abuse of the additional rights, to avoid such rights overriding the actual "one person, one vote" system and damaging the interests of other members.To innovate the macro-institutional environment. First, to innovate the policy and law environment.Great attention should be paid to the coordination and convergence between various laws and policies, avoiding contradictions and conflicts with each other. Secondly, to implement the supporting plicy in rural credit, finance and taxation by taking the FSCEO as a single unite.In this way, the effectiveness of the financial funds can be greatly improved, and the FSCEO becomes a bridge and effective carrier for the government to support the rural economy. Thirdly, to strengthen the cultural construction, and vigorously promote the basic values and principles of "I'm for all, all are for me" ,and pass them from generation to generation in the form of songs and motto. At the same time, those who have made outstanding contributions to the FSCEO should be awarded.