FINANCIAL ECOLOGY, RURAL INCOME AND AGRICULTURAL DEVELOPMENT: EVIDENCE FROM CHINA

The concept of ecology introduced a new perspective into the study of financial development. A regional financial ecology which includes rural households, enterprises, financial institutions, social organizations, and the government would allow the core entities to supplement each another and promote the development of rural credit and agricultural loan market. Based on cross-regional data, this paper analyzed the relationship between financial ecology, rural income, and agricultural development. The results show that in counties with a better financial ecology, rural households have a higher income and RCCs enjoy higher quality assets. Further case study show that, a better regional financial ecology can significantly alleviate the problem of asymmetric information in the agricultural loan market and lower the transaction costs between market participants. In order to set up a better financial ecological system, the operation quality of regional economy must be raised, the financial infrastructure and institutions must be improved, and the urban-biased financial development strategy must be changed.