Rice vs.Wheat:How Rice Farming Shaped Informal Finance in China

China’s financial system is characterized by the coexistence of both formal and informal finance,and informal finance appears to be more prevalent in the south of the country compared to the north.In this paper,we use the historical demarcation of rice-farming regions and the percentage area of rice sown to ascertain the regional distribution of rice farming in the south and wheat farming in the north in order to analyze the role of rice farming in the evolution of different types of financial institutions in China.We find that rice cultivation has a positive effect on informal financial development,though its impact on formal finance is insignificant.Unlike wheat farming,rice cultivation requires farmers to collaborate during busy farming seasons and necessitates the construction of irrigation systems.Such collaboration helped enhance an acquaintance society,in which both parties to transactions enforced the rules and contract terms of their own initiative,paving the way for informal finance.This paper not only demonstrates the cultural roots of the regional financial disparities in China but also expands the research on the ways in which farming practices from the past have shaped the development of China’s present financial markets.

The Reasolis Why Informal Finance Exists and Some Suggestions on Policy

Compared with formal finance, informal finance owns advantages in information and collateral. These are the reasons why informal finance exists widely in many ways. However, informal finance has its deficiencies too. On the basis of the analysis of the advantages and deficiencies of informal finance, the paper also offers some suggestions on policy that government should adopt on informal finance.

Relationship Between Credit Access and Agri-economy

With the rapid development of Chinese economy, the question of credit is becoming more and more important. Especially in China rural area, building a new socialist countryside needs the support of finance. While as we all known, the financial system in rural area is not effective enough to promote the productivity and the level of welfare of household.

A Literature Review of the Influence of Social Capital on Commercial Credit

As a typical informal system,social capital plays an important supplementary role in China’s economic transition period.Informal finance based on commercial credit plays a role in the economic cycle.However,there is currently a lack of literature to directly examine the impact of social capital on the use of commercial credit by enterprises.This article aims to systematically sort out the theoretical development of social capital on commercial credit,which mainly includes the definition of social capital,its effects,the influencing factors of commercial credit,and the summary of the existing research results of social capital on commercial credit.It is hoped that this literature review will provide guidance for future research.