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The structure and reform of rural finance in China

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  • Pei Guo
  • Xiangping Jia

Abstract

Purpose - Historically, China's political attempts to provide access to rural credit has met with mixed results and an institutional structure that often strays from intended policy goals. Unlike Robin Hood of English lore, the emergence of financial institutions in China appears to have robbed from the poor to lend to the rich, with actions that severely depleted the lending resources required for rural development. Historically, there has been a close correspondence between financial depression and the many policy‐driven financial institutions that dominated the rural financial system in China. More recently, ongoing reforms are dedicated towards a gradual liberalization within the system. Therefore, the purpose of this paper is to rethink the structure of rural finance in China, reviewing the current reform and putting forward the policy implications. Design/methodology/approach - The paper explores the context of agricultural transition and political process as defined by the various interlinkages across the Chinese rural financial system. Findings - The paper finds that there has been negligible progress in the evolution of the rural financial market in China. The policy‐led financial institutions ended up as merely a disbursement window and a costly drain on state budget. Institutional changes were locked in by patching up the existing institutions. The ongoing reforms projected by policymakers promote competition among different institutional lenders and thus potentially improve the financial services in rural areas. Originality/value - This paper analyzes the new‐round reform of rural finance in China and brings forward the future direction of rural finance in China.

Suggested Citation

  • Pei Guo & Xiangping Jia, 2009. "The structure and reform of rural finance in China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 1(2), pages 212-226, January.
  • Handle: RePEc:eme:caerpp:v:1:y:2009:i:2:p:212-226
    DOI: 10.1108/17561370910927444
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    Cited by:

    1. Xuanming Ji & Kun Wang & He Xu & Muchen Li, 2021. "Has Digital Financial Inclusion Narrowed the Urban-Rural Income Gap: The Role of Entrepreneurship in China," Sustainability, MDPI, vol. 13(15), pages 1-18, July.
    2. Turvey, Calum G. & Kong, Rong, 2010. "Informal lending amongst friends and relatives: Can microcredit compete in rural China?," China Economic Review, Elsevier, vol. 21(4), pages 544-556, December.
    3. Jia, Xiangping & Cull, Robert & Guo, Pei & Ma, Tao, 2016. "Commercialization and mission drift: Evidence from a large Chinese microfinance institution," China Economic Review, Elsevier, vol. 40(C), pages 17-32.
    4. Liqiong Lin & Weizhuo Wang & Christopher Gan & Quang T. T. Nguyen, 2019. "Credit Constraints on Farm Household Welfare in Rural China: Evidence from Fujian Province," Sustainability, MDPI, vol. 11(11), pages 1-19, June.
    5. Jiang, Meishan & Paudel, Krishna P. & Mi, Yunsheng & Li, Jingrong, 2023. "Farmland transfer and rural financial structure: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 90(C).
    6. Yue Hu & Siwei Lu & Huiyuan Zhang & Guibo Liu & Jiangang Peng, 2021. "Empirical Analysis on the Performance of Rural Credit Cooperative’s Shareholding Reform Based on the Rationale of Isomorphic Incentive Compatibility," Sustainability, MDPI, vol. 13(5), pages 1-29, March.
    7. Calum Turvey & Xiaolan Xu & Rong Kong & Ying Cao, 2014. "Attitudinal Asymmetries and the Lender-Borrower Relationship: Survey Results on Farm Lending in Shandong, China," Journal of Financial Services Research, Springer;Western Finance Association, vol. 46(2), pages 115-135, October.
    8. Hao Luan & Xiangping Jia & Jikun Huang, 2014. "Household Access to Nongovernmental Microfinance, Formal Credit and Informal Credit in Rural China," Review of Economics & Finance, Better Advances Press, Canada, vol. 4, pages 61-76, May.
    9. Qian, Zongxin & Tu, Yonghong & Zhou, Zinan, 2022. "The impact of financial development on the income and consumption levels of China’s rural residents," Journal of Asian Economics, Elsevier, vol. 83(C).
    10. Jianmei ZHAO & Jun ZHANG & Peter J. BARRY, 2014. "Do formal credit constraints affect the rural household consumption in China?," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(10), pages 458-468.
    11. Zhao, Jingfeng & Tang, Jianmin, 2018. "Understanding agricultural growth in China: An international perspective," Structural Change and Economic Dynamics, Elsevier, vol. 46(C), pages 43-51.
    12. Qiutong Xue & Sixian Feng & Kairan Chen & Muchen Li, 2022. "Impact of Digital Finance on Regional Carbon Emissions: An Empirical Study of Sustainable Development in China," Sustainability, MDPI, vol. 14(14), pages 1-26, July.
    13. Zhang, Shengling & Dou, Wei & Wu, Zihao & Hao, Yu, 2023. "Does the financial support to rural areas help to reduce carbon emissions? Evidence from China," Energy Economics, Elsevier, vol. 127(PA).

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    More about this item

    Keywords

    China; Rural economies; Credit; Loans;
    All these keywords.

    JEL classification:

    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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