Some Reflections on How to Promote the Healthy Development of Cooperatives
Since the implementation of the "Law on Specialized Farmers' Cooperatives," China's specialized farmers' cooperatives have developed rapidly, showing characteristics of heterogeneity and diversity. The 2013 Central Document No. 1 pointed out: “manpower support for developing new types of farmers' cooperative organizations in various forms. Farmers' cooperatives are the basic entity that drives farming households into the market, a new type of entity for developing the rural collective economy, and an effective vehicle for innovating rural social management.” “Encourage farmers to establish diversified and multi-type cooperatives such as specialized cooperatives and shareholding cooperatives.” The 2014 Central Document No. 1 further proposed: “Encourage the development of farmers' cooperatives in various forms such as specialized cooperatives and shareholding cooperatives.” The Central Government's discussion of cooperatives has already broadened in scope, no longer limited to specialized cooperatives, but rather diversified and multi-type cooperatives. Therefore, the author offers some reflections on how to promote the healthy development of farmers' cooperatives.
I. How to Reconcile “Developing the Cooperative Economy” with “Developing and Strengthening the Collective Economy”
The "Decision" of the Third Plenary Session of the 18th Central Committee proposed: “Adhere to the foundational position of household management in agriculture, and advance innovation in agricultural management methods through the common development of household management, collective management, cooperative management, and enterprise management,” and “Adhere to collective ownership of rural land, safeguard farmers' land contract management rights in accordance with the law, and develop and strengthen the collective economy.” At the same time, the "Decision" also proposed “encourage rural areas to develop the cooperative economy.” This raises a question: What exactly is the relationship between the collective economy and the cooperative economy? How can they be reconciled, and where is the effective point of connection between them?
(1) The Collective Economy Is Making a Comeback
After reform and opening up, a considerable number of administrative villages became hollow-shell villages, with no collective assets other than land. According to statistics, among the 726,000 villages nationwide in 1996, villages with no collective economic income that year accounted for 30.8%, villages with collective economic income below 50,000 yuan that year accounted for 42.9%, villages with collective economic income of 50,000 to 100,000 yuan accounted for 13.5%, and villages with collective economic income above 100,000 yuan accounted for 12.8%. With the advancement of industrialization and urbanization, some villages either used collective operational construction land to develop industries, or obtained a portion of compensation funds through collective land expropriation, and the collective economy gradually gained a material foundation for development. In 2012, among 902 administrative villages in Wuxi, Jiangsu, there were total net assets of 30.2 billion yuan, with an average collective income of 5.68 million yuan per village. In 2013, after the first collective construction land in the country entered the market, Fenghuang Community in Bao'an District, Shenzhen obtained 34.8 million yuan in land revenue and 13,980 sq m of industrial supporting property.
However, under the new circumstances, how to implement the policy measures of the "Decision" to “grant farmers more property rights,” how to establish relevant systems, and how to explore effective forms of realizing the collective economy through multiple channels so as to preserve and increase the value of collective assets, enable collective members to obtain opportunities and returns for sustainable development, avoid repeating the old path that led to the collapse of the original collective economy, and avoid the new collective economy once again degenerating into a “cadre economy” -- this is a question worth exploring.
(2) Clarifying the Relationship Between Village Committees and Village Collective Economic Organizations
The relevant provisions of current laws cause the functions of village committees and village collective economic organizations to overlap. Relevant laws give both village committees (and village small groups) and village collective economic organizations the right to possess and manage rural land, including agricultural land and rural collective construction land, as well as other collective assets. There is no clear legal provision on who disposes of rural collective assets. Article 8 of the "Organic Law of the Villagers' Committees" newly revised in 2010 stipulates that “the villagers' committee shall, in accordance with legal provisions, manage the land and other property belonging to the village farmers' collective ownership,” but later mentions that “the villagers' committee shall respect and support the autonomy of collective economic organizations to independently conduct economic activities in accordance with the law,” which seems somewhat contradictory.
At present, there is an urgent need to form "Regulations on Rural Community Collective Economic Organizations" in the form of administrative regulations of the State Council through reform experiments, and to advance the legislative process for rural collective economic organizations when conditions are ripe. It is necessary to clarify through laws and regulations the connotation and extension of village and group collective economic organizations and their powers, clarify the mechanisms for acquiring and withdrawing membership qualifications in village and group collective economic organizations, and clarify members' responsibilities, rights, and obligations; on this basis, achieve the unity of individual membership rights and property rights of collective economic organization members. At the same time, it is necessary to clarify the relationship between village committees and village collective economic organizations. As autonomous organizations of a rural community nature, village committees' expenditures for social management and providing public services for all residents of the community should be included in local fiscal budgets. Village committees should only undertake the public service functions of the village, and the management rights over land and other collective assets should be completely stripped away and placed in the hands of farmers' collective economic organizations.
(3) How to Reconcile “Developing the Cooperative Economy” with “Developing and Strengthening the Collective Economy”
The "Decision" of the Third Plenary Session of the 18th Central Committee proposed: “Safeguard the membership rights of farmers in collective economic organizations, actively develop farmers' shareholding cooperatives, and grant farmers the rights to possess, receive returns from, paid withdrawal of, mortgage, guarantee, and inherit shares of collective assets.” The 2014 Central Document No. 1 proposed: “Promote the reform of the shareholding cooperative system for rural collective property rights, safeguard the membership rights of farmers in collective economic organizations, grant farmers the rights to possess, receive returns from, paid withdrawal of, mortgage, guarantee, and inherit shares of collective assets allocated to households, establish rural property rights transfer and trading markets, strengthen the management of rural collective funds, assets, and resources, improve the level of asset operation and management of collective economic organizations, and develop and strengthen the rural collective economy.”
The current work in various places on confirming, registering, and certifying collective assets, clarifying property rights, and solidifying equity rights, land rights, and housing rights is essentially about determining the respective shares of qualified collective economic organization members at a certain point in time over collective assets or resources. It is about determining fairness at a certain point in time, that is, fairness at the starting point. But the future direction of collective economic development should be from closed to open, from solidified to flowing; solidification is for better flow. On the basis of clear property rights, through the form of shareholding cooperation, promote the flow of equity rights, land rights, and housing rights, with entries and exits, and capital increase and share expansion.
The Third Plenary Session of the 18th Central Committee for the first time clearly stated that the mixed-ownership economy is an important form of realizing China's basic economic system. The future direction of China's rural cooperative collective economy may become an organic component of the modern enterprise system, a diversified mixed-type market operating entity with the shareholding cooperative system as the main body. This transformation of the collective economy will enable it to integrate the advantages of the cooperative economy and other economic forms, allowing it to maintain economic vitality and market competitiveness.
II. How to Promote the Development of Genuine Rural Cooperative Finance in Deepening the Reform of the Rural Financial System
The "Decision" of the Third Plenary Session of the 17th Central Committee proposed: “Allow qualified specialized farmers' cooperatives to carry out credit cooperation.” The "Decision" of the Third Plenary Session of the 18th Central Committee proposed: “Allow cooperatives to carry out credit cooperation.” The 2014 Central Document No. 1 pointed out: “Develop new types of rural cooperative financial organizations. On the basis of farmers' cooperatives and supply and marketing cooperatives with democratic management, standardized operations, and strong driving capacity, cultivate and develop rural cooperative finance, and continuously enrich the types of financial institutions in rural areas. Adhere to the principles of the membership system and closure, and on the premise of not absorbing deposits and making loans externally and not paying fixed returns, promote the development of community-based rural mutual fund organizations.”
The practice of rural financial development in countries around the world has proven that in a diversified and competitive rural financial system, cooperative finance should be an important component. Without the support of cooperative finance, it is also difficult for farmers' cooperatives to develop and grow. But currently China does not have formal farmers' cooperative financial organizations in the true sense of being owned by farmers, controlled by farmers, and providing financial services for farmers. According to data from the China Banking Regulatory Commission, as of the end of May 2013, only 49 rural mutual fund cooperatives had been approved for establishment by the CBRC, with total assets of 1.53 billion yuan. In addition, there are various types of non-governmental credit cooperation organizations. For example, village-level poverty alleviation mutual aid societies guided by fiscal poverty alleviation funds and promoted by poverty alleviation offices at all levels cover 16,000 poor villages nationwide; there are about 70 or more farmer self-reliance service societies promoted by the China Foundation for Poverty Alleviation; some provinces have pilot-established farmers' mutual fund societies, most of which have not registered.
It is worth noting that some companies or lenders whose purpose is to profit from funds absorb deposits and make loans for profit under the name of cooperative mutual fund associations, blurring the boundary between cooperative finance and private lending and disrupting financial order. According to media reports, cooperative mutual fund departments have proliferated in Guannan, Jiangsu, Wenzhou, Zhejiang, Siping, Jilin, Puyang, Henan, Yixian, Hebei, and other places. In Guannan, a serious incident even broke out in which four mutual fund societies closed down and thousands of people demanded their money back.
In recent years, Yancheng, Jiangsu, has piloted “farmers' mutual fund cooperatives” with the aim of serving farmers in the region and solving the difficulty farmers face in obtaining small loans needed for production and daily life. These cooperatives were approved for establishment by local agriculture, rural areas, and farmers work departments and obtained “private non-enterprise unit” registration certificates issued by local civil affairs bureaus. The cooperatives operate through absorbing deposits and making loans, and promise depositors that after deposits mature, depositors can not only receive interest but also dividends. However, starting in early 2013, several cooperatives in Tinghu District, Yancheng, successively emptied out, and many depositors' savings could not be redeemed. These cooperatives, from their signs to interior decoration, from counter windows to waiting areas, from display screens to display boards, were not much different from ordinary banks.