China's Rural Financial Development: A Supply And Demand Analysis Framework

The development of the rural economy provides a solid foundation for the stable development of our national economy. In order to guarantee the rapid and steady development of rural economy, a standard and sound financial system is required to provide funds. Now China has formed a rural financial system with the formal finance as the mainstay, informal finance as the supplement. Although rural financial market appears perfect and has a high coverage rate, in fact the supply of formal finance can hardly satisfy the financial demands that the rural economy development produces. The main representation is that the peasant households and the township enterprise can't finance smoothly. The market players in rural areas are seriously short of funds, and this has become the bottleneck of the rural economy development.So what reformation steps we should take to resolve the contradiction between the financial demand and supply in the rural economy? First, we should deepen financial reforms in formal financial institutions. The most important part is to improve the system of rural credit cooperatives, carry out reformation of the Agricultural Bank of China and the Agricultural Development Bank of China. Second, normalize rural informal finance. We should fix its position, improve its dual structure, and establish deposit insurance system while inspect its financial activity. Besides, several other measures can help resolving the contradiction. For example, gradual marketization of the interest rate is necessary to improve the financial service in rural area; strengthen and improve rural financial supervision; rigorously prosecute parties committing illegal and criminal acts in the financial sector in accordance with the law, guard against general financial risks, and work to maintain financial stability and security, and so on.In summation, setting up a perfect rural financial system will contribute to increase financial services in rural market, and give full scope to the important role of the rural financial system in stimulating rural economic growth.