Rural Finance: State Banks and Rural Credit Cooperatives in the Context of Fund Transfers

Cheng Tang ()
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Cheng Tang: Chuo University

Chapter Chapter 7 in Studies on the Chinese Economy During the Mao Era, 2022, pp 143-160 from Springer

Abstract: Abstract During the period of planned economy when China’s strategic priority was to develop the heavy industry, did rural financial institutions function as “pumps” to provide funds for the development of urban industrialization? Or did they function as “blood transfusion” mechanism by injecting funds into programs designed to improve agricultural productivity? Based on the data from 1949 to 1978, this paper examines rural capital flow and the impact of Rural Finance on agricultural development under the planned economy system. The results indicate that: first, from 1952 to 1978, the total net outflow of funds in rural areas through financial institutions was 14.771 billion yuan. Second, the way in which the flow of rural funds through financial channels varied during the different time periods. For instance, during the early stage of the planned economy (1953–1957), funds continuously flowed into rural areas through financial channels, with a small and stable inflow scale; during the later period of economic development (1971–1978), rural funds continued to flow out through financial institutions, and the scale of capital outflow showed a “U” shape. Third, agricultural loans significantly improved the level of agricultural development during the period of planned economy. The above findings shed light on our understanding of the positive role played by rural finance during the period of the planned economy.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:stechp:978-981-19-5410-8_7

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DOI: 10.1007/978-981-19-5410-8_7

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