Thoughts On Constructing Rural Financial System In China

It has become China's main task to develop the agriculture and rural economy and raise the farmers' income. Rural finance, which has been proved to be effective in converting savings to investments, is of critical importance in such process. However, the present state of rural finance is worrying with most of the formal commercial finance quitting rural area, the policy finance (CDAB) limited in a small managing area and the rural cooperative finance, the only formal institution that does business with fanners directly, operating awfully because of bad management and historic problems. Thus it is high time that we reconsider the construction of rural financial system.The problem of present rural financial system is not a problem only lies in the lack of supply, but a structural disequilibrium. As we give a subdivision to the suppliers and demanders in rural finance system, we may find that the commercial service provided by the commercial bank and rural cooperatives which plays the leading role in the rural financial supply does not harmonize with the need of surviving and managing demanders, which account for the biggest proportion in the rural population. Then, it would not be strange to see that the formal commercial institutions are hurry quitting rural market while there is a brisk demand for financial services. Therefore, the most important point in reconstructing rural financial system is to eliminate such disequilibrium. First, we should realize the very main customer for formal finance; they are the "marketing" subjects. It also has to serve the managing subjects through financial innovation. Second, we should give a sensitive, reasonable judgment to informal finance. They have adapted themselves well to fit the financial need of surviving subjects. As to form a good financial environment, we should increase the fiscal aid to the rural economy, perfect the law and regulation system, and develop the agricultural insurance.Development in rural economy is reflected by the change in proportion of different subjects in rural population. To be specific, the proportion of surviving subjects decreases, while that of managing and marketing subjects rises. The most important way to get this is to upgrade the agricultural industry through sending financial aid to managing and market subjects. It then would bring in the change in financial demand, further in the financial supply structure.