China's Rural Formal Financial Market Credit Risk Research

With rapid economic growth in recent years, the Chinese finance market has been growing fast, but there are still a lot of problems in the developing financial market of rural area during this period. Among them, there are all kinds of risk, with especially credit risks being particularly outstanding.This article summarizes the important causes of China’s rural financial market credit risk taking into account internal and external reasons, through investigation of the existing problems and using a combination of previous research.The external reasons include an innate high risk characteristic regarding agricultural production and management, Chinese high frequency of natural disaster, an incomplete agricultural infrastructure construction which leads to the poor ability in resisting external risk. As well there is an instability and lack of standardization in rural society’s finance and legal environment, incomplete policy support from local government for various rural financial institutions, whose main serving focus is usually farmers and rural entrepreneurs short of credit consciousness. Imperfection in external supervision of our country’s rural financial institutions has increased the credit risk of the rural financial market. Internal reasons include poor management of rural financial institutions, a lack of clear property rights system, no scientific management of assets and liabilities, in-house staff’s business levels need to be improved; In addition, imperfect internal control results in an unreasonable corporate governance structure. Taken together, those factors put conspire to be credit risk of our rural financial market.After deep analysis of above, this text comes to the conclusion that rural financial market credit risk regulation and control should proceed utilizing approaches to internal risk control and external supervision reinforcement, addressing both the symptoms and the root causes, paying attention to early warning to potential risk, preferring treatment to remedy. In addition, a method of diversification of risk should also be paid attention to, such as the establishment of perhaps an agricultural futures market, to achieve safety in China’s rural financial market by effective risk management, thereby safeguarding the rapid development of China’s primary industrial capacity and its national economy.