Study On Path Selection Of Rural Finance In China

Agriculture is the foundation of national economy. China is a large agricultural countrywith huge rural population, weak agricultural foundation, and large gap between urban andrural areas. The condition of rural finance in China is not optimistic, although finance is theblood of economy. In order to evacuate the rural market because of pursuing profit, thestate-owned commercial banks have abbreviated their institutions since2000. Because of itssingle function, Agricultural Development Bank has not approached its desired effect yet.Postal Savings Bank as the formal financial institutions in rural areas and township all overthe country play a role of providing farmers with basic credit loans and financial services.However In recent years, these banks invest large amount of money into the industry of thecities instead of agriculture and rural development to obtain higher yields. As the only officialto serve the "three rural" financial institutions, rural credit cooperatives are still insufficient intheir governance structure, financial position and operating mechanism, so it is urgent to bereformed and improved. The main problems in China’s rural financial are as follow: theimbalance between the supply and demand; the serious weakening services of financialinstitutions; serious loss of capital; the slow development of agricultural insurance and beingto improved rural financial environment. As the major force in the rural financial reform, allof the rural credit cooperatives are facing difficulties in their operation.Since2003, China continues to promote the deepening reform of rural financial. In2006,the China Banking Regulatory Commission issued the relevant documents to lower thethreshold and strict supervision of all the capital and financial institutions to open up the ruralmarket. So far, a number of micro-credit companies, rural fund cooperatives and village bankshave set up successively. After several years of development and practice, Microfinance hasbecome an important means to deepen China’s rural financial, promote the rural economicdevelopment in rural areas, increase farmers’ income level, and solve the "three rural" issue. This paper based on the theories of rural finance explores the development process ofChina’s rural financial reform, and analyzes the main problems and causes rural finance atpresent. After summarizing the characteristics and experiences of foreign rural financedevelopment, we put forward to some advises and measures to promote the development ofrural economy and improve their backward situation, as well as farmers’ income level asfollow: firstly, It is necessary to improve the rural financial system and establish multi-levelrural financial system. Secondly, we urgently need to deepen rural credit cooperatives reformand develop agricultural insurance system. Lastly, we also should optimize financialenvironment in rural areas and strengthen the law enforcement to promote the development ofChina’s rural finance.