A Study On The Reform And Development Of Rural Credit Cooperatives Under A Multi-equilibrium Framework

Rural finance is one of the key factors that supports rural economic and social development, and rural credit cooperatives in rural areas is the most important financial institution. After several reforms, rural credit cooperatives are still difficult to achieve the desired results. On the one hand, rural credit cooperatives find themselves in financial difficulties, on the other hand, rural credit cooperatives did not support rural economic units effectively. Then, what is the fundamental reason for the unsatisfied reforms? Only to find out the key of the problem can we make the right choice of the next reform of rural credit cooperatives.This thesis first introduces a new multi-equilibrium analytical framework and thinks on the condition that China's rural economy is difficult to achieve balanced development, it is the second best choice to achieve the "multiple equilibrium" between economic development of economic units and their corresponding financial development under different states of growth. However, the real fact of China's rural areas shows that there is no convergence between the development of rural economy units and their corresponding financial development to "multiple equilibrium". The paper then analysis that the reason why China's rural areas failed to achieve "multiple equilibrium". Previous reforms of rural credit cooperatives were led by the government and it is the government who decided institutional arrangements of rural credit cooperatives, seeing financial factors as exogenous variables. This resulted disharmony between the institutional arrangements of rural credit cooperatives and the endogenous financial needs of rural economic units. So it failed to achieve "multiple equilibrium" and impacted the effect of the reforms. Then it indicates that the next reform of rural credit cooperatives should change. The government-leading innovation of rural credit cooperatives always fall behind changes of external environment. Time differences lead to indistinctively effects of rural credit cooperatives'supporting to agriculture, rural areas and farmers. The Government has to change the strategy of reform passively. So the reform should perform from down to top, starting with endogenous financial needs of rural economic units. At present, the endogenous financial needs of rural economic units cause it demands cooperative finance and commercial finance in rural areas. If other cooperative or commercial financial institutes were established in rural areas, rural credit cooperatives could separate their cooperative and commercial business, and rural credit cooperatives can transform into commercial institutions. If only rural credit cooperatives exist in rural areas, cooperative and commercial business should be considered both sides.