The Research On The Development Of Rural Finance In China

Since the reform and opening-up, China's national economy has made remarkable development. However, rural development still faces many difficulties. The income of rural household grows slowly while the income gap between urban residents and rural ones and that between the different districts are becoming greater. The issues concerning agriculture, countryside and farmers are impediment to the whole development of economy in China. Therefore, more attention to the innovation in institutional framework and the reasonable political adjustment is undoubtedly needed. On the other hand, finance is the core of modern economy, so as a important component of modern finance, rural finance-the pivotal allocation system of capital elements--is playing an increasingly significant role in rural economy.It is a consensus among the theoretical study and practice that to develop the rural economy and to promote agricultural production and farmers'income require improving the rural financial service and increasing rural credit supply. Despite several-years rapid growth in China's agricultural finance, it should also be noted that the existing arrangements for the rural financial development can not meet the multi-level and a wide range needs of the rural economy due to the typical the dualistic economy structure in urban and rural areas and the financial policies which inclined to urban industry sector thus severally restrain rural finance, There are obvious defects in arrangements for formal financial system, while informal finance has been locked in an informal, non-standard and inefficient situation, resulted from its unique evolution. All these situation calls for innovative financial system to promote the rural economy with rapid and sound development.The purpose of this thesis is based on the demand of rural financial, taking advantage of studying the credit demand behavior of farmers and financing bottleneck of rural small and medium-sized enterprises (SMEs) to analysis the rural financial demand of the basic characteristics and influencing factors in both less developed and developed regions, the result of empirical studies show that rural finance significantly improve farmers welfare and enhance the productivity of rural SMEs. So it provides scientific basis and policy recommendations for eliminating financial difficulties for farmers and SMEs. The significance of this thesis includes, first analyzing of the development of rural finance from a macro-level and revealing the problem in order to take institutional design for improving the rural financial services and meeting the demand for credit in rural areas and promoting rural economic development. Second, based on rural micro-level, using econometric methods to empirically study the credit demand behavior of farmers in underdeveloped regions and the welfare effects of loans, in order to find some path to promote farmers' income. Third, taking advantage of field survey data to find out the factors of SMEs financing in developed rural region and studies to what extent credit input improve the productivity of small and medium-sized business, then clarifies the key points of financial innovation.From a micro-level, this thesis centers on rural finance improving rural economic development, interprets the economic and financial behavior of farmers and small and medium-sized enterprises by drawing reference to a large extent to existing results and theoretical conclusions from relevant front-line theories, including modern financial development theory, and rural financial development theory and so on. We use the approach try to achieve a combination of history and reality, empirical analysis and normative analysis, comparison and learn from the combination. The whole course of the study starts in accordance with the "Theory-Empirical Investigation-Countermeasures" so that the study shows the characteristics of the methodology, namely from abstraction to concrete, from theory to practice.This thesis draws the following main conclusions through massive theoretical and empirical analysis:1. Under developed rural region always suffer from financial constraints to some extent. Both formal finance and informal finance have profound effects on production and operating activities of rural residents. In addition, the function and significance of informal finance can't be ignored. Accordingly, government can try to activate a wide range of informal financial organizations. On the ground that non-agricultural income are not eligible for the guarantee of credit, formal organizations should cater for farmer credit needs and reduce the risk in farmers'credit by highlighting product innovation and exploring effective collateral information as many as possible to create novel financial products.2.28.4% sample in under developed rural region suffers credit rationing in both formal and informal finance. A large proportion of credit rationing that can be attributed to lack of collateral and relatively high transaction cost that farmers cannot afford derives from formal finance. Furthermore, in rural region the main factor that can reduce credit rationing to farmers is income level of farmers, both in formal finance and informal credit. According to the empirical survey, credit rationing engenders the situation that farmers can't acquire (or partly acquire) capital needed, thus hinder farmers'income growth. On the other hand, increasing credit capital can significantly improve farmers'income.3. Small and medium-sized enterprises in developed rural region made tremendous contribution to local economy. Compared to large enterprises, small enterprises have a relatively high equity financing ratio and a low debt financing ratio. The relationship between enterprise scale and capital resources, namely the rate of capital from big bank rise and the that from small bank decline as the scale expand, indirectly proves the view point of that local medium-size and small-size banks can exert more positive influence on solving small and medium-sized enterprises financing problem. While high-credit ranking enterprises have a high debt financing ratio, low-credit ranking ones have a high equity financing ratio (owned capital). Most rural small and medium-sized enterprises have intensive capital demand, lacking in circulating funds.4. The survey categorizes the enterprises into experiment group which acquired credit from banks in 2007 and contrast group which didn't acquire credit from banks. It's uncovered in the survey that there are huge differences between two groups in scale, net income, sales, rate of fixed asset, own ship of land, intangible asset and the age of asset. The enterprises having larger scale, more intangible asset, more ability to offer collateral and older asset age will have more probability of getting credit. "Soft information" between banks and enterprises is still playing a critical role in financing institution of small and medium-sized enterprise in countryside. Bank credit has an obviously positive influence on samples'fixed asset scale, asset scale, net profit and personnel.5. Now in rural financial market of China, rural households and rural small and medium enterprises (SMEs) are faced with serious credit rationing and obstacles in accessing to formal credit supported by financial institutions. The first main reason is the majority of rural households and rural SMEs lack of collateral, so they face with the "Natural Financing Bottleneck".On the other hand, few rural financial institutions monopolize the market and they use traditional loan mechanism which is completely commercial, simply using of traditional loan mechanisms will make the majority of farmers and rural small and medium-sized can't get loan. Therefore, we need to make innovations to both the rural financial markets and mechanisms.