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Solutions of Rural Demand-based Financial Repression in China

Author: YangGuoXiong
Tutor: HouLiPing
School: Southwestern University of Finance and Economics
Course: World economy
Keywords: Farmer Financial repression Rural finance Need-based financial repression
CLC: F832.4
Type: Master's thesis
Year: 2010
Downloads: 258
Quote: 2
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Abstract

Since the reform and opening up, China's national economy has made great achievements, but the \In recent years, the decline in the proportion of the rural economy in the national economy as a whole, the widening income gap between urban and rural residents, especially in the latter part of the absolute value of the income of the farmers in the 1990s and even declined. The reasons for the slow growth of the rural economy are many, one of the important factors is the rural financial problems. At present, China's rural financial existence of various problems: inadequate rural financial organizations, state-owned commercial banks merge branches below the county; poor asset quality of rural credit cooperatives; Agricultural Development Bank to cut policy supporting agriculture business; above problems led to a large number of rural funds to the cities; hard for farmers to obtain loans from the formal financial sector; private financial activity, to increase the financial risk of the rural areas. China's rural financial source of the problem lies in the existence of the dual economic structure of rural financial repression. Rural financial repression divided into rural demand-type inhibition and rural supply-type inhibition. The rural supply financial repression financial institutions in rural areas, fewer outlets, a small amount of funds, the total supply shortage caused by financial repression. Rural demand financial repression, mainly due to the low degree of commercialization, monetization, loans difficult due to financial repression and civil financial \Rural demand-type of financial repression performance for the lack of effective demand of the farmers to formal financial institutions, leading to a serious shortage of investment in agriculture. Rural supply-type financial repression to some extent caused the rural demand financial repression. Therefore, the study of the causes of need-based financial repression in rural areas, explore the rural rural demand financial repression solution to solve the shortage of rural financial resources, increase investment in agriculture, increasing farmers' incomes, the development of the rural economy is important. Research ideas of this article is: financial repression and financial deepening theory based on analysis of existing rural demand financial repression generated and drawn on the basis of the research Japan and South Korea rural financial experience of Japan and South Korea to deal with rural finance. Finally, in the experience of rural financial learn from Japan and South Korea combined with the actual situation in China to put forward suggestions and countermeasures to solve our rural demand financial repression, the main conclusions of this paper are as follows: First, there is an objective demand of the rural financial repression phenomenon specific performance: not of growth of household savings balance, and a serious shortage of investment in agricultural production; serious outflow of capital in rural areas, and rural credit cooperatives loans \Second, farmers are rational in their lending decisions, must consider the benefits and costs of the loan. From the terms of the supply of funds, lack of farmers during agricultural investment funds, he can choose to borrow from formal financial institutions and non-formal financial institutions. China's non-formal financial institutions due to consanguinity, geopolitical, and karma advantages to farmers loans advantage, the comparative income of agricultural investment is low, the loan interest rate deregulation brought \The main reason for the lack of effective demand collateral required by the formal financial institutions. Third, Japan and South Korea's agricultural production is relatively labor-intensive operations have historically been a long period of farming culture, Japan and South Korea also belongs to the emerging capitalist countries, the financial system has obvious color artificially constructed, and China have similarity. China is currently in a period of rapid economic growth, similar to the post-war period of rapid growth in Japan and South Korea -80 years of the 1960s, South Korea's economic takeoff. Has a positive role by drawing on the historical experience of Japan and South Korea the development of rural financial need-based financial repression of China's rural. World War II, Japan and South Korea in rural areas has also been facing the problem of shortage of funds, the farmers borrow funding sources, only a small part of the formal financial institutions. Japan and South Korea by increasing the financial support of the rural and agricultural, vigorously develop the rural cooperative economic organizations and cooperation in finance, the establishment of rural financial credit information system and other measures to solve the problem of shortage of funds in rural areas, and beneficial to the promotion of the national rural economy development. Fourth, to promote the economic development of rural areas and the improvement of farmers' income in recent years, China's rural areas, implemented a series of reform measures. To increase financial support to rural, to promote the reform of rural cooperatives, the establishment of a policy-oriented agricultural insurance company, and the relaxation of restrictions on the entry of rural financial. These measures have a positive effect on the promotion of the economic development of rural areas to solve rural demand financial repression. However, these measures only consider rural issues from the supply side, the implementation there are all sorts of problems. China in addressing rural demand financial repression can not rely solely on the financial means, and should learn from the experience of Japan and South Korea. Finance, banking, insurance, support measures and integrated development of rural economic cooperation organization of farmers to resolve the status of the farmers less than formal financial institutions. Interest rate control is necessary to further liberalization of financial markets in rural areas, so that formal financial institutions profitable loans to farmers to release control of the rural financial market interest rates at the same time, the market liberalization of interest rates in order to avoid loan interest rates of loans for farmers the adverse effects of the state should be interest rate subsidies on farmers' loans. Household income is expected to be stable through the improvement of the system of agricultural subsidies and improve policy-oriented agricultural insurance system. To establish integrated farmers Economic Cooperation Organization, purchase of farmers in the production, marketing and processing of agricultural production and agricultural guidance, in order to increase production capacity and market bargaining position of farmers. Finally, to establish the farmers loans credit system, maintain the stability of the financial system in rural areas. The one hand, the establishment of loan insurance system, to reduce the risk of formal financial institutions for farmers loans. On the other hand, the establishment of a policy guaranteed to provide loan guarantees for farmers. The innovation lies in this article: that to solve the problem of China's rural financial repression should start from the monetary side (for the market supply and demand of China's rural financial problems, our scholars have done a lot of research, due to the \apparent observed measures at the policy level, easy to take, and Chinese scholars on the issue of rural financial repression research study \less by the financial institutions in rural areas, fewer outlets, the small amount of money, and the total lack of supply caused but China to improve China's rural financial supply side (such as the establishment of the Agricultural Development Bank of China, rural regional banks expand the credit cooperatives governance structure and management system to relax the effect of the reform of the sector, market access, etc.) is unsatisfactory, the shortage of financial resources in China's rural areas, the phenomenon has not been a fundamental change.: put forward China's rural financial repression solution to solve the financial problems in rural areas can not merely rely on the financial means, in the use of financial means to synthesize other means countries should relax interest rate controls, a good policy to provide rural financial, legal environment, and support efforts to help the development of rural cooperatives, to increase the role of financial instruments In addition, also draws on the successful experience of Japan and South Korea, the rural financial bind to China's national conditions, to help solve rural demand gold financial repression.

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