Rural Finance in Poverty-Stricken Areas in the People's Republic of China. Xuechun Zhang
Читать онлайн книгу.
characteristics typical of state-owned enterprises in the planned economy, including lack of ownership, soft budgetary discipline, and insider control, resulting in more government involvement and increased distance from farmers. Farmers still must resort to informal financial institutions to meet their financial needs.
The traditional rural financial system has contributed to rural economic growth, but the “overdraft” of financial resources from rural areas can hardly be sustained
It is fair to say that, so far, the PRC has not truly launched market-oriented rural financial reform. The relationship between the government and the market has not been resolved, reform has focused on changing existing institutions rather than on building a modern financial system, there remains a mismatch between the rural financial and nonfinance sectors, and reform has tended toward a one-size-fits-all approach.
First, the ends and the means of the government’s rural work were confused, and the relationship between the government and the market was not properly resolved. The objectives of the government’s rural work are to solve problems related to sannong, to develop the rural economy, and to raise rural household income. Multiple means could be utilized to achieve these objectives, and credit support is one important channel through which rural financial institutions can serve and support the rural economy. However, if rural financial institutions are forced to extend credit support as a major means for the government to achieve its rural targets, then rural financial institutions are constrained in maximizing their profit. This not only harms the independence and efficiency of financial institutions but also provides a basis for direct government interference in the business of financial institutions.
Facing a shortage of fiscal resources, rural financial institutions unduly assumed some fiscal functions to promote rural development, which contributed to serious problems in rural finance. Large losses on the part of rural financial institutions made farmers’ access to credit increasingly difficult, and rural capital outflows and inadequate credit became major constraints on rural economic development. In this context, changes to and evolution of the single rural financial pattern previously tailored to a planned economy were inevitable. The rural financial system has actively or responsively evolved to meet the financial needs of sannong.
If RCCs do not perform well, rural finance in some regions has no backup
Second, with the exception of commercialized reform of the ABC in the mid-1990s, rural financial reform has been limited to the reform of the RCCs. No effort has been made to build a modern rural financial system. A truly modern rural financial system should have the capacity to accommodate formal and informal finance, direct and indirect finance, and competition among different financial institutions and financing approaches. One key lesson of the PRC’s gradual reform is that reform entities need external impetus. In this sense, it may be said that the secret of successful reform lies outside the reform itself.
The reform of the collective rural economy has achieved great breakthroughs, thanks to institutional innovations such as the family contract responsibility system and the reform of large state-owned enterprises. Nevertheless, the reform of the rural financial system has so far been dominated by the monopolistic RCCs. In some regions, informal finance and other innovative financial institutions were labeled as illegal fund-raising or disrupting the financial order, so that informal finance was actually killed. If RCCs do not perform well, rural finance in some regions has no backup.
Third, the mismatch between the rural financial and nonfinance sectors is yet to be resolved. Historically, the PRC’s financial system was based on collective credit, or government credit, which was measured by the nature of the enterprises or the administrative level of the government in question. In the early period of specialized banks, assessment of a borrower’s repayment ability was based on collective credit, which took the form of implicit guarantees by industrial regulators or the government. As long as enterprises within a particular jurisdiction made profits on the whole, collective credit was sound. Industrial regulators and local governments controlled the majority of economic resources, such as appropriation and pricing of raw materials, enterprise licensing, energy, and transport, and were backed by large fiscal revenues. Thus, the higher the administrative level of a regulator or government, the more resources it controlled and the better was its creditworthiness. Collective credit did not depend on collateral; thus, state-owned or collective enterprises with support from industrial regulators or local governments could easily borrow from banks, which largely explains the protracted and large numbers of nonperforming loans of the PRC’s financial institutions.
Beginning in the mid-1990s, however, intensified competition worsened the profit-making capability of local state-owned and collective enterprises, and collective credit was on the brink of collapse. To protect their lending, financial institutions were forced to look for substitutes for collective credit. The commercialized reform of banks, launched in 1994, was intended to replace specialized banks with commercial banks and to make a distinction between policy lending and commercial lending, at least in terms of the form of the reform.
However, the reform represented a revolutionary shift in the credit basis of financial institutions, from collective credit to individual credit—an inevitable process in the transition from a planned economy to a market economy. The basic feature of individual credit is to disregard administrative level or the nature of a borrower’s enterprise and to base bank lending on a borrower’s repayment ability as measured by a series of indicators, including adequate collateral or guaranty, repayment history, corporate size, information disclosure, and so forth. With the emergence of individual credit, enterprise ownership is no longer a key factor in banks’ lending decisions, as long as an individual meets the lending criteria.
Thus, banks gradually shifted from lending only to state-owned and collective enterprises and began to include private enterprises. This promoted broad reform of small and medium-sized state-owned enterprises and collective enterprises, especially township enterprises. However, it will take time to resolve the mismatch between the rural finance sector and the credit system of the nonfinance sector.
Finally, the one-size-fits-all reform approach has been unable to keep up with changing economic and financial needs, given the differences in rural financial demand across the eastern, central, and western regions of the PRC. With the deepening of financial reform, especially since commercialized banking reform was launched in the mid-1990s and shareholder banking reform began in 2003, enormous changes have taken place in the PRC’s rural financial system. Growing regional disparity in economic structure has created differences in supply and demand in the rural finance sector. In advanced coastal regions, for example, the growth of nonagriculture industries has increased the need for financial services in extra-agriculture rural sectors and has increased both the need for and the actual integration of rural finance with the entire financial system. In the central region, the share of non-crop-growing sectors, including animal husbandry and agricultural products processing, has been increasing; thus, specialized production accounts for the bulk of financial needs and financial supply has been trending toward specialization. Poverty reduction and streamlining consumption are the main financial needs in the western region, which has relatively few profit-making opportunities, a shortage of natural resources, and large uncertainties related to market and weather conditions.
The major demand for financial services in poverty-stricken rural areas includes the need to make deposits, to remit funds, and to access capital for simple production
Despite differing regional needs, however, each round of rural financial reform since the 1990s has been carried out uniformly across the whole country, giving localities little discretion in adapting implementation to specific local circumstances. As a result, previous reforms have failed to solve practical problems, and a pattern that worked in some regions might be difficult to implement in other regions. Thus, new problems continue to emerge in the process of reform.
The major demand for financial services in poverty-stricken rural areas includes the need to make deposits, to remit funds, and to access capital for simple production. Postal savings agencies and RCCs satisfy these demands well. However, the current financial structure faces great challenges in creating sustainable development that will