The changing characteristics of Agricultural Cooperative Finance in Modern China

Agricultural cooperative finance in modern China started from the rural credit cooperative experiment of China Foreign Relief Committee in Hebei Province in the 1920s. After the 1930s, with the exhaustion of traditional rural finance and the aggravation of economic crisis in China, cooperative finance was regarded as a good prescription for reviving rural economy by the national government and all walks of life, and spread to all parts of the country. After the government intervened, it began to use administrative power to force forward and gradually exclude social forces. After the War of Resistance Against Japan, a cooperative financial model dominated by government monopoly was formed. Modern Chinese agricultural cooperative finance enterprise started in 1923 and ended in 1949 when Kuomintang government defeated Taiwan, which lasted more than 20 years. According to the different guiding subjects, it has experienced three modes: leading by social groups, co-guiding by social groups and government, and monopolizing by government forces. Under three different guiding modes, cooperative finance presents different development characteristics.

In the 1920s, Hebei Credit Cooperation was completely under the leadership of the Chinese Foreign Relief Committee, a social organization, without relying on any administrative coercive force. Because of this, China International Relief Committee mainly relied on cultivating farmers 'cooperative consciousness, establishing perfect incentive and restraint mechanism, improving the quality of social affairs management and attracting farmers to join the cooperative. Therefore, the characteristics of cooperative finance development are as follows: (1) pay attention to cooperative knowledge propaganda and education, farmers form cooperatives independently, members freely enter or leave cooperatives;(2) credit cooperation is the only form, cooperative organizations develop slowly, and regional distribution is limited to Hebei Province;(3) cooperative organizations are of good quality, members have strong cooperative consciousness, and there is no phenomenon of a few bad elements controlling cooperative affairs;(4) A sound loan risk prevention mechanism has been established and can be effectively implemented;(5) The loan funds are mainly allocated by the Chinese Foreign Relief Committee without commercial finance, the loan channel is single, and the loan scale is small;(6) The cooperative finance performance is good, the cooperative loans can basically be repaid on schedule, and the non-performing loan rate is almost zero;(7) The cooperative loans can be truly used for agricultural production and operation, and there is no phenomenon of conversion into usury.

In the early 1930s, rural economy declined and finance dried up. The government and all walks of life sought ways to revive rural areas. Because of its successful development, the early Hebei rural credit cooperative enterprise was regarded as a good remedy for rural relief, and was vigorously promoted. Agricultural cooperative finance has thus entered the stage of development in many provinces throughout the country. During this period, agricultural cooperative finance partly relied on the administrative power of the government, but did not completely exclude the power of social groups, and was jointly dominated by the government and social groups. However, with the passage of time, there is a trend that government power is gradually strengthened and social power is continuously weakened. Under this mode, the development of agricultural cooperative finance presents the following characteristics: (1) the form of cooperative organization develops from single credit cooperation to production, consumption, transportation and marketing, but credit cooperation is still the main form;(2) although the principle of free membership of members is retained in the system, the government exerts indirect influence by administrative power, so to some extent there is the nature of forcing farmers to join cooperatives, which makes the increase speed of cooperative organizations greatly accelerated;(3) the publicity and education of cooperation is a mere formality, the cooperative consciousness of members is low, and the quality of social affairs management declines;(4) urban commercial and agricultural financial institutions have joined in cooperative loans one after another, resulting in an upsurge of "returning commercial capital to agriculture" and a rapid expansion of loan scale;(5) The profit-making nature of financial institutions leads to excessive risk avoidance, emphasis on mortgage guarantee and contraction of credit loans in the process of issuing cooperative loans, resulting in vicious competition in developed cooperative areas and no one in backward areas, which is contrary to the purpose of cooperative finance, and cooperative finance is alienated into commercial finance;(6) The quality of cooperative loans declines, the rate of non-performing loans rises, and a few bad elements control cooperative loans in some areas, which is transformed into usury phenomenon.

In the late 1930s, in view of all kinds of defects in "returning commercial capital to agriculture", the national government intended to establish a unified cooperative financial system in the whole country, in which the state monopolized the supply of loan funds, unified management of cooperative finance, and completely excluded commercial financial institutions from the field of cooperative finance. After the War of Resistance began, the above-mentioned plan was carried out in the rear. After that, cooperative finance was incorporated into the national rural financial system.

Under the government monopoly guidance mode, China's agricultural cooperative finance presents the following development characteristics: (1) Agricultural cooperative finance is regarded as a tool to expand rural finance and increase agricultural production, which is completely enforced by the state administrative force, and the independent organization and free advance and retreat mechanism are abandoned. (2) The cooperative organizations develop by leaps and bounds in the short term, and the distribution areas expand rapidly; the cooperative organizations completely lose their initiative, develop passively, and finally dissimilate into a part of the rural administrative system;(3) The cooperative loan funds are monopolized by the state financial institutions, and the rate of non-performing loans is abnormally high, and the funds are wasted seriously, so it is difficult to continue to develop;(4) The development of cooperative finance is completely transferred by the will of the government, and the government will rise and fall if it wants;(5) Co-operative loans are manipulated by undesirable elements within the co-operatives and transformed into new usury, most of which are not used in agricultural production, thus losing the significance of mutual aid and co-operation.

Agricultural cooperative finance in modern china was guided by social forces and organized spontaneously by farmers. Later, due to government intervention, it gradually evolved into forced promotion by government administrative forces and finally alienated into national financial instruments. Along with the transformation of dominant force and the evolution of guiding mode, China's agricultural cooperative finance shows a trend of accelerating development speed, expanding development scale, and deteriorating cooperative organization and loan quality. By comparing the three different modes of modern cooperative finance and combining with the realistic environment of China's agricultural cooperative finance reform, we can get the following enlightenment:

First, agricultural cooperative finance belongs to economic enterprise in essence, and should obey its objective development law. As a modern agricultural financial form, agricultural cooperative finance must be rooted in the soil of agricultural economy and financial development, and its development speed and existence form have strong independence independent of human will. The development course of agricultural cooperative finance in modern China shows that no matter what purpose, artificially accelerating or influencing the development of cooperative finance will inevitably lead to the decline of cooperative finance quality, increase of risk, difficulty in realizing sustainable development, and finally lead to the alienation of cooperative finance and deviation from the purpose of mutual cooperative finance.

Second, the quality of agricultural cooperative organizations and the awareness of social cooperation are the cornerstones for the sound development of cooperative finance. The quality of cooperative management and cooperative consciousness of agricultural cooperative organizations are directly related to the effective operation of cooperative loan risk control, cooperative loan distribution and utilization. The development of agricultural cooperation in modern china shows that the risk of agricultural cooperative loan under the government-led mode is extremely high, and the loan alienation is usury, which is caused by many factors, but the direct reason is the inefficiency of cooperative organization management system. Therefore, in the current management of agricultural cooperative finance, we should pay attention to the standardization of cooperative management, strengthen cooperative education, improve farmers 'cooperative consciousness, and lay a foundation for the healthy development of cooperative finance.