The Dynamics and Impact of the Development of Rural Cooperative Funds (RCFs) in China

Du Zhixiong

No 1998-02, Chinese Economies Research Centre (CERC) Working Papers from University of Adelaide, Chinese Economies Research Centre

Abstract: Chinese Rural Cooperative Funds (RCFs) were developed to meet the needs of rural economic development during the extensive reform of the rural economy system in the mid 1980s. From their trial establishment in 1984, and since 1991 in particular, RCFs have expanded rapidly in terms of portfolio and extent of business, and become an important component of the Chinese rural capital market. Establishment of the RCFs challenged the conventional rural financial system notwithstanding the fact that the extent of fund raising and the target and availability of loans by RCFs, and so on, were rigidly constrained in the beginning. In practice, more than 10 years' operation of RCFs has positively and profoundly impacted on the rural capital market and on the reform of the rural financial system though it still faces many development problems. These resulted in RCFs being frequently blamed with disordering the financial market, the rural financial market in particular, during the period of rectifying the macro-finance. This paper briefly reviews the origin and background of RCFs as well as their evolution and policy environment. It also analyses the features and business operation of RCFs and assesses their contribution to rural economic development. The paper discusses the problems existing in the practice of RCFs and reviews their prospects. At present, rural non-bank financial institutions have become an important feature of the rural financial system in China's underdeveloped areas. This article analyses the current situation and basic characteristics of such institutions based on a survey conducted in 1997 in a county in Henan Province. To a certain extent, this case study reflects some of the common problems and features of rural financial development in underdeveloped areas in China.

Pages: 29 pages
Date: 1998
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Citations: View citations in EconPapers (1)

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