What are the changing characteristics of agricultural cooperative finance in modern China?

Agricultural cooperative finance in modern China began with the rural credit cooperation experiment conducted by the China International Famine Relief Commission in Hebei in the 1920s. After the 1930s, as traditional rural finance in China dried up and the economic crisis intensified, the cause of cooperative finance was regarded by the Nationalist Government and all sectors of society as a good remedy for reviving the rural economy and was promoted throughout the country. After the government intervened, it began to use administrative power to push it forward by force and gradually squeezed out social forces. After the War of Resistance, a cooperative finance model completely monopolized and led by the government took shape. The cause of agricultural cooperative finance in modern China started in 1923 and ended in 1949 when the Nationalist government retreated to Taiwan, China, lasting more than 20 years. Depending on the guiding subject, it successively went through three models: leadership by social organizations, joint guidance by social organizations and the government, and monopolistic guidance by government power. Under the three different guidance models, cooperative finance showed different development characteristics.

In the 1920s, the credit cooperation cause in Hebei was completely under the leadership of the social organization the China International Famine Relief Commission and did not rely on any administrative coercive power. Precisely for this reason, the China International Famine Relief Commission mainly relied on cultivating farmers' cooperative awareness, establishing a complete incentive and restraint mechanism, and improving the quality of cooperative management to attract farmers to join. Therefore, under this model, the development characteristics of cooperative finance were as follows: (1) it emphasized publicity and education on cooperative knowledge, farmers organized cooperatives independently, and members freely entered or withdrew from cooperatives; (2) credit cooperation was the only form, the development speed of cooperative organizations was relatively slow, and the regional distribution was limited to Hebei Province; (3) the quality of cooperative organizations was excellent, members' cooperative awareness was generally strong, and there was no phenomenon of a small number of bad elements controlling cooperative affairs; (4) a complete loan risk prevention mechanism was established and could be effectively implemented; (5) loan funds mainly relied on relief fund allocations from the China International Famine Relief Commission, did not use commercial finance, the loan channel was single, and the loan scale was relatively small; (6) the performance of cooperative finance was good, cooperative loans could basically all be repaid on schedule, and the non-performing loan ratio was almost zero; (7) cooperative loans could truly be used for agricultural production and operation, and there was no phenomenon of conversion into usury.

In the early 1930s, the rural economy declined and finance dried up, and the government and all sectors of society sought paths to revive the countryside. Because of its successful development, the early rural credit cooperation cause in Hebei was regarded as a good remedy for relieving the countryside and was vigorously promoted. The cause of agricultural cooperative finance thus entered a stage of development in many provinces across the country. During this period, agricultural cooperative finance partly relied on government administrative power and had not yet completely excluded the power of social organizations, and was jointly led by the government and social organizations. But as time went on, it showed a trend of government power gradually strengthening and social forces continuously weakening. Under this model, the development of agricultural cooperative finance showed the following characteristics: (1) cooperative organizational forms developed from a single credit cooperation into multiple cooperative forms such as production, consumption, and marketing, but credit cooperation was still the main form; (2) although the principle of members freely joining cooperatives was retained in the system, the government indirectly exerted influence through administrative power, so to a certain extent there was a coercive nature of forcing farmers to join, which greatly accelerated the increase in cooperative organizations; (3) cooperative publicity and education became a mere formality, members' cooperative awareness was low, and the quality of cooperative management declined; (4) urban commercial and agricultural financial institutions joined cooperative lending one after another, a upsurge of “commercial capital returning to the countryside” appeared, and the loan scale expanded rapidly; (5) the profit-seeking nature of financial institutions led them, in the process of issuing cooperative loans, to excessively avoid risks, emphasize mortgage guarantees, and contract credit loans. The resulting situation of vicious competition in cooperatively developed areas while no one showed interest in backward areas ran counter to the purpose of cooperative finance, and cooperative finance became alienated into commercial finance; (6) the quality of cooperative loans declined, the non-performing loan ratio rose, and in some areas a small number of bad elements controlled cooperative loans and converted them into usury.

In the late 1930s, in view of the various abuses that appeared in “commercial capital returning to the countryside,” the Nationalist Government intended to establish a nationwide unified cooperative financial system, monopolize the supply of loan funds by the state, uniformly manage cooperative finance, and completely exclude commercial financial institutions from the field of cooperative finance. After the War of Resistance began, the above plan was implemented in the rear areas of the War of Resistance. Afterward, cooperative finance was incorporated into the national rural financial system.

⟦NL> Under the government monopoly guidance model, China's agricultural cooperative finance showed the following development characteristics: (1) agricultural cooperative finance was used as a tool to expand rural finance and increase agricultural production, was completely pushed forward by state administrative power, and the mechanisms of independent cooperative formation and free entry and exit were abandoned. (2) Cooperative organizations showed leap-style development in the short term, and the distribution area expanded rapidly; cooperative organizations completely lost their initiative, developed passively, and were ultimately alienated into a constituent part of the rural administrative system; (3) cooperative loan funds were monopolistically supplied by state financial institutions, the non-performing loan ratio was extremely high, capital waste was serious, and sustainable development was difficult; (4) the development of cooperative finance was completely determined by government will, rising when the government wanted it to rise and declining when the government wanted it to decline; (5) cooperative loans were manipulated by bad elements within the cooperatives and converted into new-style usury, most failed to be used for agricultural production, and the meaning of mutual aid and cooperation was lost.

The cause of agricultural cooperative finance in modern China was guided by social forces, a mutual aid and cooperative financial cause spontaneously organized by farmers, and later, because of government intervention, gradually evolved into one forcibly pushed forward by government administrative power, and ultimately became alienated into a state financial tool. Along with the transformation of the leading forces and the evolution of the guidance models, China's agricultural cooperative finance cause showed a development trend of gradually accelerating development speed and expanding development scale, while the quality of cooperative organizations and loans increasingly deteriorated. Through comparative reflection on the three different models of cooperative finance in modern times, and in light of the current real environment of China's agricultural cooperative finance reform, the following inspirations can be obtained:

First, agricultural cooperative finance is essentially an economic undertaking and should follow its objective laws of development. As a modern form of agricultural finance, agricultural cooperative finance must be rooted in the soil of agricultural economic and financial development, and its development speed and forms of existence both have relatively strong independence that does not depend on human will. The development process of agricultural cooperative finance in modern China shows that, regardless of the purpose, artificially accelerating or influencing the development of cooperative finance will inevitably lead to a decline in the quality of cooperative finance, increased risks, difficulty in achieving sustainable development, and ultimately trigger the alienation of cooperative finance and deviation from the purpose of mutual aid cooperative finance.

Second, the quality of agricultural cooperative organizations and social cooperative awareness are the cornerstone of the sound development of cooperative finance. The quality of cooperative affairs management in agricultural cooperative organizations and the level of members' cooperative awareness are directly related to the risk control of cooperative loans and the effective operation of many links such as the distribution and use of cooperative loans. The development of agricultural cooperation in modern China shows that under the government-led model, the extremely high risk of agricultural cooperative loans and the alienation of loans into usury were certainly caused by many factors, but the direct reason was the ineffectiveness of the management system of cooperative organizations. Therefore, in current agricultural cooperative finance management, attention should be paid to the standardization of cooperative affairs management, cooperation education should be strengthened, farmers' cooperative awareness should be raised, and a foundation should be laid for the sound development of cooperative finance.