Research On The Relationship Between The Market Competition Level Of The Credit Market In Rural Finance And Farm Loans

Under the "new normal", concerning the reform of rural finance, can contribute significantly to rural economic development and help to solve the problem of poverty as well as promote structural transformation of China’s economy. In rural financial markets, one the one hand, farmers’ financial incomplete is a common phenomenon, on the other hand, financial institutions seeks higher profit, which cause the rural financial problems. Therefore, discussing if more intense market competition level can solve rural financial problems and meet the require put forward by the World Bank, which point out rural financial institutions should increase coverage and achieve sustainable development, and adapt to the unique economic structure of Chinese rural financial demand and their variations is worthy of further research. This article analyzes the relationship between the degree of competition in rural market and farmers’ loans. The demonstration of the relationship has important significance in some aspects, including guiding the layout of rural financial system 、 fiscal policy and new financial institution development etc., and can also provide some evidence for accurate poverty alleviation policy.This paper is divided into five parts. The first chapter is introduction, which illustrates the background of paper, the significance of the topic, and introduces the literature review, research content and methods. The second chapter is the theoretical part, which based on the financial development theory and institutional change theory. This part defines the concept of market competition and rural household loan, then analyzing the relationship between competition and loans to farmers in the theoretical analysis by using the SCP Paradigm and Hotelling model. The third chapter combines with present research achievements about rural finance supporting rural economic development, and sort out the historical change and development path of China’s rural financial institutions, and further analyze the supply-side, demand-side trends of the rural financial market, and give an comprehensive analysis of market structure, influencing factors, supply and demand, competition and its impact of China’s rural financial system according to market supply and demand, and finally quantify the level of competition in rural financial market. The fourth chapter is empirical testing, by using dynamic panel model and the system GMM method analyze the rural commercial banks 2006-2011 inter-provincial panel data,study the relationships existing between level of farmer loans and financial market competition. The empirical results show that there is a nonlinear relationship between the rural finance loans to farmers and the competition among financial institutions. Thus promoting competition blindly without taking into account current situation of rural area could result to be counterproductive: the more institutions in rural areas, the less financial welfare for peasant household. Finally, the fifth chapter gives policy-proposals based on research findings to form the rural financial market which is multi-level, wide coverage and sustainable.