Financial Deepening With China's Rural Economic Development

As an important part of entity economy, the healthy development of the rural economy cannot do without the support of rural finance. However, in the process of inspection of the ruralfinancial market serving and supporting the development of rural economy, China’s ruralfinancial market as a whole is still supply and demand in the financial shortage of low-levelequilibrium trap. On one hand, rural financial institutions prevalent organizational form of asingle, the capital of the small-scale and credit structure disorders; On the other hand, farmersand small and medium enterprises due to lower income levels and operating efficiency, and otherfactors led to the lack of investment demand and consumer demand lag. About reasons for theseproblems, although there are "sannong" own particularities, and the history of problems left overfrom factors such as, but more as a financial control measures implemented in rural China for thepurpose of preventing financial risks institutional factors, which also a direct result of the realitythat there are a lot of "financial repression" phenomenon in China’s rural financial market. Inorder to completely solve the "financial repression" phenomenon caused by the low-levelequilibrium trap, only relying on financial deepening and other ways to continue to strengthenand to play the market in the financial resources to optimize the position and role of the basicconfiguration. In this paper, based on the theory of financial development and economicdevelopment theory, along the internal logical sequence of financial repression, financialdeepening and economic development, firstly expounded the theoretical framework and analysisparadigm of China’s rural financial decelopment, and further pointed out that financial deepeningis an important factor to affect the development of the various aspects, but the effect is not thesame by means of qualitative and quantitative analysis methods, for example, listed severalstylized facts between financial deepening and China rural economic development, and used thegray relational analysis method of testing their relationship; Secondly, in order to delve into theimpact of the effect being not the same reason, the focus from the three villages in the eastern,central and western regions of China, summed up in different parts of the main features of itsreasons, financial repression and the formation of the basic conclusions of the Chinese rural areawith a clear regional differences in financial repression basic pattern; Thirdly, from the Chineserural practice, focusing on analysis and research of the current Chinese rural financial deepeningmain feature, path selection, degree of measured and effect of the problem, trying to have acomprehensive understanding of China’s rural financial deepening; Finally, after building amechanism logical model, the VAR vector auto-regression model of empirical analysis offinancial deepening and development of China’s rural economy, and put forward relevant policy recommendations. In the above analysis of ideas and steps, this article by the large number oftheoretical and empirical analysis, draw the following conclusions:(1) China’s rural financial repression is in demand-type and supply-type phase coexistence.Different parts in China have different emphasis on the financial demand and supply suppressionbecause of different resource endowments and the level of development.(2) The advantage factor analysis method shows that, on one hand, rural financial deepeningis an important factor of the development of China’s rural economy. In particular, it is a veryprominent role in the growth of the rural economy. On the other hand, even though the ruralfinancial deepening relations and rural economic development is quite close, the effect on allaspects of economic development is not the same.(3) From the causality between the financial scale and rural economic development, there isa two-way Granger reasons in the short term. However, in the long run, such a causalrelationship is not very significant. From the dynamic analysis, the financial scale has a positiveimpact on the development of China’s rural economy. However, the knock-on effects will begradually reduced until the last stable state. The view from the contribution of the relevantfactors, financial expansion of the scale that has the highest rate of contribution to thedevelopment of China’s rural economy is far greater than the financial structure optimization andfinancial efficiency of the impact.(4) From the causality between financial structure and economic development in rural areas,whether short-term or long-term, there is no Granger causality. The best explanation of theresults should be the influence of the non-credit market in rural areas for rural economicdevelopment or be very limited. From the dynamic analysis, the financial structure of China’srural economic development have a negative impact, and such shocks role requires the forth yearto be able to digest and ultimately be into a positive role in promoting. The view from thecontribution of the relevant factors, the contribution rate of the financial structure to China’s ruraldevelopment has been relatively low, also occupied the lower position of non-credit market inthe rural financial market.(5) From the causality relationship between financial efficiency and rural economicdevelopment, there is one way that the financial efficiency is not the Granger cause of China’srural economic development, but the development of China’s rural economy Granger causefinancial efficiency and this causal relationship was very strong. From the dynamic analysis,financial efficiency has a positive impact on China’s rural economic development, and theduration is relatively longer too. On the contribution of the relevant factors, the contribution rateof the financial efficiency to the development of China’s rural economy in the short term is not very high, and substantially lower than the financial scale of the contribution to economicdevelopment. However, the degree of long-term financial contribution to the efficiency graduallybe reflected in. After10, there is a significant qualitative change and the financial efficiency hasevolved to become the most important motivating factor for the development of China’s ruraleconomy.