The Effect Of Rural Finance Development On The Rural Income

Currently, the domestic economy enters a new historical phase of industry re-feeding agriculture and cities supporting rural areas, thus solving the "three rural issues" becomes a critical link in the process of building a harmonious socialist society. However, it can’t be done without an effective support of finance to achieve the development and prosperity of agriculture and the increase in farmers’ income. But because of the effect of a long-term dual economic structure of China, the development of rural economy is rapidly slow and rural finance is still the weakest part among the financial system, which causing the impediment of farmers’ income increasing and the enlargement of the gap between urban and rural incomes. Moreover, the recent researches of rural income also indicated that the gap between the urban and rural income has been persistently increasing, which has brought a huge challenge to the harmonious development in the rural area.The influence factors of rural income are many, the degree of the development of rural fiance is theoretically considered as the most important factor in influencing the farmers’ income, and has been proved by some researches. However, the existing researches were often carried out in a national level or in one particular province, hardly appearing some comparative studies among different areas, thus, it couldn’t reflect the possible effect of different economic development level or the different rural financial development level in rural income. Meanwhile, the existing researches placed emphasis on the influence of financial development on the urban and rural income gaps, lacking the analysis of the income inequity within a rural area. Based on these, this research tried to respectively analyze the impact of rural financial development on the increase and gaps in the rural income in three different areas from the relationship between rural financial development and the rural income (both in gross and structure). Through the comparative analysis on the three areas, this research seek the relationship between farmers’ income growth and the income disparities, thus to lay the foundation of handling the relation between total rural income increase and the structure optimization during the process of rural financial development.Specifically, this paper chose the traditional aggregate production function as the analytical framework, and carried out an empirical analysis on the influence of rural financial development on the farmers’ income increase and disparities in three different areas using the Jiangsu province, Henan province and Guangxi province data from 1985 to 2009, as the typical provinces of eastern, central and western parts of China. The results showed that:this study has found that:the degree of rural financial development in Jiangsu province has restrained the increase of rural income but reduced the income gap; the degree of rural financial development in Henan province and Guangxi province both promoted the increase in rural income but enlarged the income gaps. Comparing the empirical data from different provinces, it can be found that with the enhancement of the rural financial development degree, its effect on the increase of rural income weakens, and even will restrain the rural income increase; in the meantime, the rural residents’ income gaps accord with the inverted U-shaped model hypothesis, which is, with the development of rural financial degree, the income gaps will first increase, and then diminish.Finally, aiming at different regions, this paper proposed differentiated suggestions on the relationships between rural financial development and rural income based on the theoretical and empirical bases above:it has to shrink the rural financial development scale and stabilize the rural financial development efficiency in the developed areas, such as the Jiangsu Province; for the medium levels of development areas, such as the Henan Province, it has to adjust the rural financial development scale and greatly increase the rural financial development efficiency; while for the underdeveloped areas, such as the Guangxi Province, it needs to expand the rural financial development scale and gradually improve the rural financial development efficiency.