Mechanism And Empirical Study On The Transformation Of Financial Value Of Rural Household Assets

As the credit economy, the modern market economy is characterized with asset capitalization. How to transform the rural household assets to financial values with rural finance which is the core of rural economy is significant for dealing with the issues concerning agriculture and revitalize the rural economy. This dissertation is to research the mechanism of transforming the rural household assets to financial values with empirical study. On the basis of information asymmetry, asset capitalization and financial development theories, this paper advocates the conceptual framework of transforming the rural household assets values to financial values at first, and analyzes the related theories, then further studies the forms of insufficient transformation and the reasons & influences with a combination of qualitative analysis and quantitative analysis, and makes some policy suggestions at last.(1) Main Contents of Studying1) A theoretical framework of transforming the rural household assets values to financial values has been constructed. The related concepts, the necessary elements of input, the external environment for dependence and the mechanism of transformation have been clarified, which is a theoretical basis for the study in the next.2) The situation and problems of transforming the rural household assets values to financial values have been studied. The situations of rural household assets, the transformation to financial values and the detailed forms of insufficient transformation have been analyzed with descriptive analysis and empirical analysis based on the field data.3) The reasons for insufficient transformation of rural household assets values to financial values have been studied in the aspects of government, laws, market, finance and rural household with qualitative analysis at first, and then been studied empirically with Probit model.4) The influences of insufficient transformation of rural household assets values to financial values have been studied in the aspects of theoretical analysis, diagnose and quantitative analysis, and it may influence the business starting, income and consumption of rural households.5) Research proposed a long-term mechanism and policy framework to speed up the transformation of rural household assets values to financial values.(2) Main Conclusions of Studying1) In the more than 30 year development after the reform and opening, the extensive rural areas have accumulated a large scale of assets of multiple sorts, and there is a great potential for transforming the rural household assets values to financial values. As the premise and basis, the value of rural household assets decides the transformation to financial values in scale, structure and efficiency. The investigation of 1046 rural households reflects the average household asset is 353.6 thousand RMB, mainly in the forms of land, homestead, house, financial assets, etc. Based on this, the whole rural household assets of China in 2013 reached 51630 billion RMB. The large asset value has a great potential for transforming to financial values.2) With the combined promotion of central government and local government, the rural household assets values have been transformed to financial values to some extent but it is insufficient: this transformation has been practiced in a few pilot areas without expansion; a low percentage of rural households transformed their assets values to financial values; a few assets have been transformed, and there is a large room for further exploitation; the successfully transformed assets are distributed unbalanced with a serious structural unbalance. The empirical study results show that many variables of high value assets are insignificant, which proves that the transformation does not have popularity and regularity.3) The insufficient transformation of rural household assets values to financial values is due to multiple reasons of government, laws, market, financial institutions, etc. For the government, it has inadequate guidance, incomplete profiles & regulations, inefficient work of reaffirmation of the right, certification and registration, low level of protection. For the laws, there are no clear definition of the rights for land & homestead, no permission of pledging the land or homestead, and insufficient legal confirmation of rural household investment as assets. For the market, there are incomplete services for the rural household to pledge the assets, bad financial environment in the rural areas, and no habit of transforming the assets to financial values. For the financial institutions, there are insufficient capital investment in the rural areas, low innovation for loan on mortgage, and backward financial talent group. The empirical study results show the asset scale, property right, age, non-agriculture income, working form and labor quantity are the significant elements influencing whether the transformation can be realized in the formal channel, and the fluent asset, age, non-agricultural income, labor income, working form and social capital are the important elements affecting whether the transformation can be practiced in the informal channel.4) The insufficient transformation of rural household assets values to financial values has a significant negative effect on their economic behavior: it can restrict the rural households’ behavior, organization and scale of starting a business; it can restrict their income growth, and optimization of income structure. It can also bring bad influences to the growth of household’s consumption, and optimization of consumption structure.(3) Important Insight of Studying1)The problem of transforming the rural household assets to financial values is popular in the developing countries, and in China it has its own particularity. As the core of rural economy, how can the rural finance transform the rural household assets to financial values effectively is significant for solving the issues concerning agriculture and revitalizing the rural economy. This problem is both an economic and social problem.2)The transformation of rural household assets to financial values focuses on confirming the rural household assets legally and clarifying the property rights of all assets on the basis of safeguarding all economic entities’ rights & interests, to increase the capital values of rural household assets. We should try the best to revitalize the idle land and homestead, etc. by constructing the systems of asset pledge and transfer; we should help the rural household to gain the necessary capital for production & living by transferring the assets ownership & usage right temporarily or eternally; and in this way, can the rural economy be promoted continuously and healthily.3)With the urbanization and rural economic development, the rural household assets are growing, and the idle assets restrict the scale agricultural & non-agricultural development, so it is very necessary to fasten the transformation of rural household assets to financial values. This transformation should be aimed to balancing the maximal benefits of rural household, financial firm and governmental institution, as well as promoting the social & economic welfare of market bodies, and the harmonious development of urban & rural economies.4)Fastening the transformation of rural household assets to financial values depends on playing the subject roles of government, financial firms and rural households by innovating the present legal & rural financial systems, to coordinate the macroeconomic regulation & control mechanism and market competition mechanism.(4) Policy Suggestions of Studying1) Fasten the legal confirmation of rural assets with clarifying the property right as the target. Referring to the unclear property rights of rural assets, it is necessary to confirm and protect legally the assets in the agricultural protection, such as modern farming facilities, livestock & poultry farms, beside of promoting the confirmation of homestead, house and land in the countryside required by the Party Central Committee.2) Complete the land contracting system in the rural areas, with improving the rural land financial values as the target. On one side, moderate scaled management is the mainstream of agricultural development, and it should extend the contract properly in some areas where there is short contract period left, to encourage the investors to go on investing the agriculture. On the other side, it should complete the redistribution system of the land contracting right, referring to the problems of uneven distribution of land and unclear right of land inheritance lead by changing one’s dwelling place, marriage and no offspring, etc.3) Complete the fixed asset transfer system with exploring the financial value of dormant assets. Adjust the rules of forbidding to pledge the rural land contract right for management and usage right of homestead in the “Property Law” and “Security Law”, and detail the related process of pledging and transfer object. Furthermore, improve the legal validity of trading the homestead and house, and expand the trading object.4) Promote the security innovation continuously, with establishing a multiple security model as the target. Referring to the continuous growing of rural household assets, the financial institutions should explore the underlying security models on various rights, movable property and immaterial assets, such as the right to contract forest land, orchard, water surface for management, stock right in the cooperation organization, agricultural machinery & facilities, goods in stock & process, and trademark.5) Cultivate the transfer market of rural assets, with completing the asset pledge mechanism. Fasten to establish the service institution for evaluating, registering, transferring and stocking the rural household assets, and improve the rural household assets transfer system and hypothecation realization system.