At the 2023 Tsinghua PBCSF Global Finance Forum, Plenary Session III “Inclusive Finance Supports Rural Revitalization" was held on May 20th.
The conference was joined by Wang Yan, Deputy Director of the Planning and Finance Department of the Ministry of Agriculture and Rural Affairs, Zeng Xuewen, Chief Economist of the Agricultural Bank of China, Zhou Mingshan, Vice President & Member of the CPC ZUEL Standing Committee of Zhongnan University of Economics and Law, and Dong Bo, Vice President and General Manager of Global Ecological Cooperation Department of Yonyou Fintech, to provide advice and suggestions on promoting rural revitalization, achieving high-quality development, and promoting China's modernization.
The conference was hosted by He Peifei, Assistant Dean of Tsinghua University Institute for Fintech (THUIFR).
Wang Yan shared his insights on "Innovative Mechanisms to Promote Inclusive Financial Services for Agriculture and Rural Areas" in support of rural revitalization. He believes that the most important issue in addressing the financial challenges of rural revitalization is how to implement solutions. To address this, he shared some practical experience from his work. 1. rural finance is not only promising but also effective. He shared three sets of data from eight years of poverty alleviation efforts: fiscal expenditure, including a total expenditure of 214 million yuan from central and local governments, accounting for about 16%; enterprise investment, including a total investment of 1 trillion yuan from state-owned and private enterprises, accounting for about 7%; and the remaining 77% of all funds were from financial support, with targeted poverty alleviation funds from bank accounting for the most at 9.2 trillion yuan. It can be said that finance played an extremely important role. Wang Yan quoted another three sets of data 1. microfinance for poverty alleviation reached 925 billion yuan, benefiting 22.97 million farmers, and the overdue rate was only 0.5%; 2. the national agricultural credit guarantee data, which has accumulated guarantees of over 1.08 trillion yuan from 2015 to the present, but the default rate is only 1.4%, lower than the non-performing loan ratio of banks; 3. agricultural insurance, from 2007 to the present, the premium income of agricultural insurance has reached 470 billion yuan, with claims of 340 billion yuan and a payout ratio of 72%. Insurance companies are still profitable.
2. it is essential to address the key issues in rural finance. To understand what the key issues are, people must first understand the demand. Wang Yan divided the demand for rural finance into two levels: basic needs, such as small-scale funds for production, consumption, and circulation, and developmental needs, including large-scale funding for expanding production and investing in the industrial chain. Most of the developmental needs come from new types of agricultural entities, including family farms, cooperatives, and small and medium-sized agricultural enterprises. These are the key issues that need to be addressed. Fundamentally, the challenge lies in the lack of mortgage collateral. Although biological assets can be used as collateral under the current policy, the actual process of collateralization is difficult. In addition, risk disposal is also a challenge if problems arise. The rural property trading market is relatively underdeveloped, and most of the products are non-standard, making transactions difficult.
Finally, Wang Yan introduced the solution for rural finance, which is to implement inclusive finance through innovative mechanisms: 1. to activate full competition among financial service institutions, including agricultural and commercial banks, rural credit cooperatives, policy banks, large commercial banks, guarantee companies, and property trading markets; 2. to leverage fiscal policies, strengthen the development of agricultural insurance and increase the construction of guarantee companies through subsidies, compensation, interest subsidies, and rewards; 3. information technology support is needed to provide financial institutions with credit assessments based on agricultural subsidy data, agricultural production and operation data, and subject identities.
Chief Economist of the Agricultural Bank of China, Zeng Xuewen, shared his thoughts on the virtuous cycle of "technology-industry-finance" in rural revitalization.
Promoting the virtuous cycle of fintech industry is an important basis for promoting rural revitalization and building a strong agricultural country. He believes that there are aspects to take into consideration. First, agricultural technology should be self-reliant through financial support. Second, relying on the virtuous cycle of "technology-industry-finance" to enhance the supply capacity of finance itself.
Zeng Xuewen pointed out that industry is the key to the formation of real productivities in rural technology. It is necessary to promote the self-reliance of agricultural technology, promote the integration of agricultural technology and industry, and fully leverage the bridging role of finance. Looking at the development process of agricultural powers in major developed countries around the world, it is mainly due to the widespread application of modern technology and the strong support of the financial system. China should explore a characteristic virtuous cycle model of agricultural industry based on learning from international advanced experiences. He summarized experiences from the practices of developed countries from three aspects: 1. the construction of a diversified agricultural technology financing system; 2. the establishment of a risk-sharing mechanism for agricultural technology finance; and 3. achieving information sharing between agricultural technology and finance.
In exploration of China's unique characteristic, Zeng Xuewen shared his understanding on how to promote the virtuous cycle of "technology-industry-finance" through a multi-level and multi-subject agricultural technology finance system, which is mainly achieved through improving the fiscal guidance mechanism, conducting credit innovation, and enriching multi-level capital markets. Overall, practices in China have achieved some achievements, but there are still some shortcomings and blockages, such as the inadequate quantity and structure of financial tools to meet the needs of agricultural technology innovation, the need to enhance the role of finance in connecting technology and market subjects, and the need to further enrich innovative agricultural products.
Zeng Xuewen stated that the next step is to facilitate a virtuous cycle of agriculture-related technology, industry, and finance, fully considering the current stage, characteristics, and tasks of rural revitalization, highlighting the political, people-centered, and professional nature of financial work, focusing on solving the bottlenecks and difficulties in agriculture-related finance, and striving to build a China-specific agricultural technology financial service system. He provided five specific suggestions: 1. improve the top-level design of the “technology-industry-finance" virtuous cycle in the agriculture-related field; 2. strengthen research on segmented industries related to agriculture-related technology; 3. construct a financing system that adapts to the entire life cycle of agriculture-related technology enterprises; 4. fully leverage the role of fintech and data-driven approaches; 5. optimize the risk-sharing and risk control system.
Zhou Mingshan, Vice President & Member of the CPC ZUEL Standing Committee of Zhongnan University of Economics and Law, shared his views on "innovations in investment and He briefly outlined the four underlying logics of rural revitalization. 1. from the perspective of national security, food security is an important component of national security, and the rural revitalization strategy still regards food security as the most important bottom-line task. 2. from the perspective of common prosperity, after winning the battle against poverty, relative poverty still exists, and it is necessary to use rural revitalization to improve the income and living standards of rural populations. 3. from the perspective of economic development, rural areas have become an important area for increasing effective demand. 4. from the perspective of cultural inheritance, Chinese civilization can be inherited and developed in the process of rural revitalization.
From the perspective of investment and financing risks, these underlying logics face significant uncertainties. 1. the weak quality of the agricultural industry determines that agricultural investment faces greater risks. 2. the development ability of low-income rural populations with human capital as the core is weak, and their ability to use and apply financial tools is relatively weak. 3. a large investment gap in rural areas is concentrated in the field of public infrastructure, and investment has strong externalities.
Based on these issues, Zhou Mingshan briefly explained the three main problems in rural revitalization investment and financing from a theoretical and practical perspective: 1. the coordination problem between policy capital, financial capital, and social capital; 2. the formation of a large amount of explicit and implicit government debt during the rural revitalization process; 3. the planning of rural revitalization projects still face issues of sustainable development.
Based on these issues, Zhou Mingshan summarized the five main practices and models of rural revitalization investment and financing in various regions of China: 1. the "government investment promotion + industrial enterprises + commercial enterprises + bank capital support + agricultural business entities" model; 2. the multi-subject linkage model of "local state-owned enterprises + leading enterprises + bases + farmers"; 3. the model of "company + village collective or farmers' cooperatives"; 4. the model of "company + village collective or farmers' cooperatives"; 5. the "rural property rights financing guarantee" model.
Finally, Zhou Mingshan discussed his thoughts on the future of rural revitalization investment and financing work: 1. further clarifying the responsibilities of the government, financial institutions, enterprises, and village collectives in the field of rural revitalization fund investment; 2. reducing the cost of capital flow between urban and rural areas, and further improving the total factor productivity of agriculture; 3. focusing on the county as a carrier for urbanization, effectively guiding and developing rural demand; 4. further improving the level of project packaging and planning for rural revitalization, promoting the coordination and connection of primary industry, industry, and service industry. 5. monitoring the debt risks of rural revitalization and establishing a debt risk prevention and control mechanism.
Dong Bo, Vice President & General Manager of Global Ecological Cooperation, Yonyou Fintech, shared their practices, understanding, and thoughts on rural revitalization.
Dong first shared three insights that Yonyou Fintech has gained from its practical experience in rural revitalization: 1. the current challenge in extending the industrial chain is that the agricultural industrial chain is relatively short, so production increase and income increase have not formed an effective unity, and the speed of farmers' income growth is not fast enough. 2. new technologies still need further popularization and development in agricultural scenarios, and more financial and inclusive financial services are needed to support them. 3. further integration is needed between the agricultural industry and the emerging urbanization process, which requires the support of leading enterprises and further support for farmers' income.
Dong then introduced three challenges faced in providing financial support for rural revitalization. 1. the brand effect and quality of agricultural processing are not strong enough. 2. there is insufficient innovation and coverage in regard to supporting elements including land, assets, technology, talent, and business models. 3. leading enterprises have not yet played a driving role for small and medium-sized enterprises.
To address these issues and challenges, Dong shared Yonyou Fintech’s practical experience in these areas. He stated that unlike the past understanding of data silos between enterprises and organizations, today's data flows between different enterprises in the industrial chain and between social levels. This requires technology companies to improve the timeliness, comprehensiveness, and security of data. Yonyou Fintech has already established joint programs with many leading banks to facilitate effective interaction between enterprises and banks in the pre-loan, in-loan, and post-loan stages, which can better support the development of rural enterprises. In specific cases, Yonyou Fintech has also collaborated with relevant institutions to build data platforms that reflect the real-time status of business development, such as agricultural monitoring, breeding, and processing. Additionally, Yonyou Fintech has established comprehensive monitoring and supervision of farmland and rural basic data services platforms in multiple provinces and cities, which integrates data on capital utilization and production to facilitate decision-making and support for regional rural economic development by governments and financial institutions.
