How can farmers' financial operation rights be fully guaranteed?

In his speech at the Central Rural Work Conference on December 28, 2011, Premier Wen Jiabao pointed out: “Land contract management rights, homestead use rights, collective income distribution rights, and so on are lawful property rights granted to farmers by law. No one has the right to deprive them of these, whether or not they still need them as basic guarantees, and whether they remain in rural areas or move into towns and cities.”

In addition to land contract management rights, homestead use rights, and collective income distribution rights, there is another important property right among farmers' property rights, namely farmers' financial operation rights. It is urgently necessary to establish this as soon as possible and return the right to farmers, so that farmers have full and guaranteed financial operation rights.

⟦NL> What are farmers' financial operation rights?

So-called farmers' financial operation rights refer to farmers' rights, permitted by national policies and laws, to establish financial institutions, operate financial products and services and obtain benefits from them, as well as to obtain financial services from financial institutions.

For a long time, China's rural collective land ownership and contract management rights could not be transferred or mortgaged, cutting off at the gate any possibility of rural land “assetization.” Only after being acquired and consolidated by the municipal government to which it belonged could it be auctioned off at a “sky-high price” far above the compensation paid to farmers, with the proceeds mainly going to the government. Rural areas implemented extremely strict financial repression. Farmers who had more money that was temporarily unused could only deposit it in government-run rural credit cooperatives, the Agricultural Bank, and other financial institutions, and did not have the opportunity, platform, or right to use their own financial organizations to increase the value of that money.

To achieve social fairness, it is necessary to truly care about the poor, cherish the poor, and help the poor. Under market economy conditions, this means fully and without discount returning to them the right to obtain loans to develop household businesses and increase income, rather than withholding or blocking it, and even less prohibiting it.

Do farmers want financial operation rights?

Whether farmers want financial operation rights is a question on which China has long lacked consensus. At the end of 2006, the China Banking Regulatory Commission agreed to relax the access policy for banking financial institutions in rural areas and piloted three types of financial institutions: village and township banks, microcredit companies, and rural mutual fund cooperatives. Among them, rural mutual fund cooperatives received the least attention, and only a few dozen have been registered nationwide to date. Some people use this as strong evidence that farmers do not need their own financial organizations or financial operation rights.

However, after many rural surveys, we found that farmers generally demand access to financial loans, generally demand the establishment of their own financial organizations, and generally demand financial operation rights. I once accompanied an assessment team composed of Mr. Liang Luohui, a project officer of United Nations University, and Professor Kanok Rerkasem of Chiang Mai University in Thailand to Shale in a group of autonomous counties in Dali Prefecture, Yunnan Province, and Houqing Yi Ethnic Township in Yun County, Lincang City, to evaluate project sites funded by the Global Environment Facility (GEF)/United Nations Development Programme (UNDP). In the presence of international experts, villagers repeatedly asked for help in coordinating loans.

Farmers developing household businesses cannot get loans, and poor households find loans even more difficult. According to statistics from the China Banking Regulatory Commission, at the end of 2007, China had about 230 million farming households, of which about 120 million had loan demand. Among them, more than 78 million farming households obtained small-amount credit loans for farming households and joint guarantee loans for farming households from rural cooperative financial institutions, accounting for 33.2% of the national total of farming households. This means that 64.8% of farming households in China still do not have or cannot obtain loans. If repeated loans to large rural households and wealthy households are excluded, this proportion would fall further.

According to a June 10, 2012 report by Li Guopeng and Yang Ming, reporters for China Economic Times, Zhang Shuzhong, secretary-general of the Henan Provincial Financial Society, said in an interview with reporters that mutual fund cooperatives, microcredit companies, rural credit cooperatives, and restructured rural commercial banks and rural cooperative banks, village and township banks, plus the rural finance departments of banks such as Postal Savings Bank of China, China Development Bank, Agricultural Development Bank of China, and Agricultural Bank of China, have already formed a diversified pattern of Henan's rural financial system. But those that truly play a role and achieve good results are far too few. The overall assessment is that the rural financial predicament remains.

Then why has the development of rural mutual fund cooperatives designed for farmers almost stagnated? The real reason is that rural mutual fund cooperatives are farmers' own financial organizations. When relevant departments advocate, encourage, and organize their development, they generally gain no benefit and may even face risks, so they lack enthusiasm and may even obstruct them. At the same time, the China Banking Regulatory Commission's requirements for prudential supervision and formalized operations make their operating costs unbearable. In addition, this is also related to many people's insufficient understanding of the status and role of rural mutual fund cooperatives in the rural financial system, treating them merely as a supplement to the rural financial market. If the functions and roles of farmers' own finance cannot be fully recognized, it will be very difficult to advance rural financial reform, and the rural financial system cannot be established.

Are farmers capable of operating finance?

Some people often cite the lesson of the rural cooperative foundations piloted in the mid-to-late 1980s, which, according to data, by the end of 1996 numbered 21,000 at the township level and 24,000 at the village level nationwide, with a financing scale of about 150 billion yuan, and were shut down in 1999 by a “one-size-fits-all” approach, to argue that farmers are incapable of operating finance. In fact, the reason problems arose in farmers' cooperative foundations at that time was unclear property rights, poor management, excessive government intervention, lack of effective supervision, and the emergence of large-scale repayment risks, even runs in some local areas. The most important reason was that county and township governments and their officials interfered in the foundations and turned them into “officials' ATMs.” As some scholars have pointed out, seeking truth from facts and determining work policies according to actual conditions is a principle consistently advocated by our Party and government. Rural conditions in China vary greatly, and rural cooperative foundations were not all one situation, one model, or uniformly problematic. On the contrary, the actual situation was that some were poorly run, while others were well run. For those run well, we should help them summarize experience, make them even better, and promote and apply their experience elsewhere. For those run poorly, we should help them summarize lessons, correct shortcomings, defects, and mistakes, and turn them from poor to good. For those with serious problems, those that should be cleaned up should be cleaned up, those that should be rectified should be rectified, and those that should be banned should be banned. However, at the time, this policy was not adopted; instead, all were banned in a “one-size-fits-all” manner.

It is highly inappropriate for relevant government agencies to adopt actions such as “control, block, suppress, stop up, reorganize, and crack down” against farmers operating finance. First, this completely fails to meet the requirements of government agencies' duties such as “serving the people wholeheartedly” and the “Three Represents.” Second, this completely fails to meet the requirements of a modern market economy regarding respecting farmers, serving farmers, and granting farmers autonomy. Third, by adopting actions such as “control, block, suppress, stop up, reorganize, and crack down” against farmers operating finance, government agencies stifle rural finance and even the rural economy, seriously affecting national economic construction. Fourth, long-term suppression of farmer finance may ultimately cause social instability.