The Research On The Chinese Rural Financial Market And Its Efficiency

The"three-dimensional rural issues"(the Chinese three-dimensional rural issues concerning agriculture, countryside and farmers)is one of the bottleneck problems which limit the harmonious development of the Chinese economy and society. The key to solve the"three-dimensional rural issues"is the capital and the 2009 No. 1 Article of the Party Central Committee emphasizes that the government will enhance the service capacity of the rural finance. However, the total supply of the Chinese rural financial resources is less than the total demand,failing to reach balance. The research on the rural financial market and its efficiency has become a hot research topic but the existing researches have some limitations. People discuss finance without touching its surroundings, and discuss rural finance from perspective of only one part of rural financial market,unable to do research from the perspective of the development of Chinese financial market and rural economy.The thesis believes that the research on the Chinese rural financial market and its efficiency should be done on the basis of the development of the rural financial market and the rural economy; we need to do research on market before evaluating efficiency. Meanwhile, the Chinese rural financial market is not mature yet, it's not enough to do analysis from the perspective of neoclassical economics, we also need to use institutional economics, i.e., judging and evaluating the efficiency of the Chinese rural financial market should been done in four respects: the first one is the allocation of market economic resources, the second is the adaptability of the rural financial institutions, the third is the economic effect of the Chinese rural economic resources and the last one is the comparative efficiency of market. That is, if the economic effect of the rural finance is sufficiently utilized and promoting the economic development with effectiveness not lower than the average level of financial market, then the rural financial market can be considered effective. Conversely, the rural financial market is less effective. Similarly, if the rural financial resources can be well allocated and the rural financial institutions exhibits a favorable efficiency, i.e., the supply and demand of the financial resources can be well allocated in the financial market and the financial institutions play an effective role in coordination, then the rural financial market is effective. Otherwise, it will be considered less efficient or ineffective.The thesis begins with discussing the supply and demand issue of the Chinese rural financial market and emphasizes the main supply bodies, their features and their behaviors in term of supply. The main bodies of the Chinese rural financial market can be divided into regular finance and irregular finance. Overall, the reform of financial system leads to market dysfunction, underdevelopment and unvitality of regular finance, while irregular finance shows diversity and vigor. There are still several problems, such as the supply-side financial repression, the underdevelopment of the rural financial system, the significant regional differences, the poor asset qualities, and the excessive intervention of the local government. In term of demand, the thesis discovers that the market normalization of main demand bodies is immature, investing and financing systems are imperfect, the demand of finance is small-sized, and the rural financial market has other features of the low revenue, high riskiness, lack of guarantee and the significant regional differences.Based on the supply and demand situation, it also analyzes the supply and demand balance of the Chinese rural financial market and concludes that: the supply is far less than the demand in the rural financial market and this leads to the huge gap in the rural financial resources; a large number of the rural financial resources flows out through the existing financial system and this dries up the limited resources in the rural financial market; the supply and demand in the rural financial market are seriously mismatched. The main reason is the mess of the Chinese rural financial system, for instance, the commercial finance adverse selection function, the shortage of policy-directed financial propelling and pulling function, post office savings becoming the main channel for the outflow of the rural capitals, and lack of rural property system.Subsequently, the efficiency of rural finance market in China is analyzed involving four aspects. 1) On the efficiency of the resource allocation, the Chinese rural financial market exhibits an inadequate efficiency. Due to the inadequate competition in the financial market, the problem that the minimal financial demands are met at maximal prices by the financial institutions, accompanied with the"rent-seeking"by finance providers, further inhibits the development of the rural financial market. 2) On the efficiency of adaptability, principal forces which promote reformations are excluded by the systematic reasons, and the vested interests stand on the way of the development of the financial market. 3) On the economic effects of the rural financial market, due to the reduction of the financial resources in the Chinese rural financial market, the rural economy thereupon endured a reduction by the"rural financial resource multiplier". The insignificance of economic effects is also verified from the aspect of empirical test. 4) On the point of comparative efficiency, the promotion efficiency of the rural financial market is markedly lower than the national level, and also the overall efficiency of rural financial market is lower than the national level. Analysis also reveals that, demand restriction, high risk and low revenue are the primary reasons bringing out the present situation of the rural financial market. The rural financial"market dysfunction"and"externality", which are resulted from the"four difficult problems"of the rural financial market, further suppressed the resource supplies to it. At the same time, the absence of investing and financing systems leads to the limited availability of the current rural financial resources.Aiming at the situation and causes of the market problems and efficiency absence from two aspects of market supplying and demanding, the thesis proposes that the direction of optimizing the Chinese rural financial market are developing a competitive rural financial market and constructing the rural financial market with developmental finance. Based on this point, policy suggestions are put forward: 1) Reform the rural financial system, including improving China's multi-level and sustainable rural financial system, exploring the approach in which the rural economy is supported by the developmental finance, enhancing the agriculture-supporting social responsibility of policy-directed and commercial finance, guiding and regulating the stable and healthy development of nongovernmental finance, reforming the mortgage policies in the rural financial market, and enhancing the cultural construction of the rural finance. 2) Develop the competitive rural financial market, including developing medium- and small-scaled financial institutes and new types of the rural financial institutes, promoting the development of the competitive rural financial market by policy and system innovations. 3) Establish the developmental financial system which covers the countryside, including establishing the market normalization of the rural investing and financing main body, the credit guarantee system of the rural financial market, and risk share mechanism. 4) Perfect the functions of the rural financial system, innovate financial tools to absorb the rural finance, complete functions of the rural financial institutes, enhance the policy supporting function of the agriculture development banks, and enhance the mortgage and insurance functions of the rural financial system. 5) Establish the risk compensation institution of the rural finance, including establishing the provisions of risk institution for the rural finance, exploring the institutions for the rural finance and the industrial insurance. 6) Reform the pricing and subsidies policy for the rural finance, including the moderate release of the control of interest rate, the tax preference policy for the rural financial institutes and establishing the funds for the rural cost and risk allowance. 7) Perfect the institutions of the rural financial system, including establishing the supervision system for the rural finance, establishing the institution to insure the healthy competition of the rural financial institutes, maintaining good policy environment, and playing a proper government role.