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Introduction

Choice of Ownership and the Reform of Rural Credit Cooperatives of China Rongrong Weng April 4th, 2006 Agriculture, Food and Resource Policy AGEC 630B. Introduction. ■ Rural Financial Market of China ► Formal ● Agricultural Bank of China

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Introduction

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  1. Choice of Ownership and the Reform of Rural Credit Cooperatives of ChinaRongrong WengApril 4th, 2006Agriculture, Food and Resource PolicyAGEC 630B

  2. Introduction ■Rural Financial Market of China ►Formal ●Agricultural Bank of China ● Agricultural Development Bank of China ● Rural Credit Cooperatives (RCCs): providing 84% of formal agricultural loans ►Informal ■Performance of RCCs ● Targeting: reaching the farmers meet only 25% of credit demand ● Sustainability Governance and Ownership

  3. Previous Research:Debate On Ownership • Shareholding Commercial Banks: ►Economic development in rural areas of China (Ho,2004) ► Diminishing role of credit cooperatives as economy proceeds (Besley, Coate, and Loury,1993) • Cooperative Financial Institutions

  4. Reasons for the Choice of Cooperatives ● Argument against diminishing role of cooperatives ►Empirical evidence in Germany ► Theoretical analysis of change in cooperatives to adapt financial competition ● Characteristic of Rural Financial Market of China ►Interregional Inequality within Rural Sector of China ► Land Ownership ● Economic features of Credit Cooperative ► targeting: reducing impact of market failures

  5. RMB 5389 = CAN $ 786 RMB 1565 = CAN $ 228

  6. Targeting:Market Failure and Credit Cooperatives • market failure asymmetric information & lack of collateral transaction cost : auditing cost & enforcement cost • Joint Liability Definition: The legal liability of two or more people for claims against or debts incurred by them jointly. Mutual Screening and Monitoring

  7. Conclusion and Policy Implications • Credit cooperatives • Legal Framework • Nationwide supporting infrastructure

  8. Thank You

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