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PRC: Study on Modern Agriculture Demonstration Area Planning and Financial Support Mobilization

International Lessons on Financing Agricultural Modernization

Inadequate supply of credit. One of the biggest limitations of financing agricultural modernization and development in China is the inability of credit services to meet consumer demand. The loan products supplied by commercial financial institutions are usually characterized by high entrance standards, complex requirements, and complicated application procedures. Most loan products have very short terms, low credit lines, and inflexible payment schedules. These limitations make them unsuitable for agriculture, which is characterized by long earning cycles and large upfront costs. They could not meet the sector’s demands for working capital.

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Modern agriculture is characterized by intensive production, scaled operation, and concentration of capital investment. Due to its advanced forms of production, expansion of scale, and increased labor costs, modern agriculture demands large investments to support production. Meanwhile, new operation entities nurtured in the agricultural modernization process, including professional farmers’ cooperatives, family farms, etc., call for innovative financial services and products that can meet the 3 needs of different production entities in various fields. With regard to the establishment and effectiveness of agricultural financial operation units, a sound institutional system and well-rounded operation monitoring mechanisms are urgently needed.

Proactive guidance and strong policy support for certain regulatory issues, such as rural land transfer and rights validation, collaterals recognition and innovation, government and private institution guarantee mechanisms, etc., are also crucial for the development of agricultural modernization and finance. A unified design and planning process is also needed for the construction of the rural credit system. In summary, to support agricultural modernization through financial instruments, modern finance needs to be combined with the modern agricultural operation; and special attention must be paid to this connection and the supporting measures for modern agriculture and finance.