Coordinated Development of Agricultural Insurance, Agricultural Loans, and the Agricultural Industry in China

Abstract

The purpose of this study was to explore the relationship between agricultural insurance, agricultural loans, and the agricultural industry and find ways to consolidate and improve the interactive development between these three systems. We collected relevant data from 2009 to 2019 in 15 provinces of China and constructed a coupled coordination model to analyze the data. The results are as follows: First, the eastern part of China was ahead of the central and western parts in terms of agricultural loans and the agricultural industry, while the western part was ahead of the central and eastern parts in terms of agricultural insurance. Second, the coupling degree of the three systems in all 15 provinces reached an extremely high level. Third, all 15 provinces showed an overall continuous rise in coupling coordination degree. In 2019, eight provinces reached the medium-level coupling coordination development, and seven provinces were in a state of barely coupling coordination development. The three systems formed a mutually reinforcing relationship and basically entered a state of coordinated development. Finally, there was a great development gap between different regions of China concerning the coordinated development of the three systems, therefore, innovative development is urgently needed to further promote the coordinated development level.

1. Introduction

China built a well-off society in a comprehensive way in 2021 and historically solved the problem of absolute poverty that has plagued the Chinese nation for thousands of years. This was achieved through the success of hundreds of millions of farmers lifting themselves out of poverty and a series of effective measures taken by the government on agriculture, rural areas, and farmers over a long time. Since 2004, the Chinese central government has focused on the “three rural issues” in the No. 1 central document for 18 consecutive years, in which the issue of improving the rural financial service system was mentioned repeatedly. According to the Delegated Monitoring theory, thanks to financial services, farmers have access to modern technologies to improve productivity and income (Trinh & Nguyen, 2021). As China’s rural economic development mode kept transforming in recent years, rural finance has played an increasingly prominent role in the process of agricultural economic development. China’s agricultural production activities have always faced the serious threat of various natural disasters. Agricultural insurance can effectively mitigate the risk and reduce the impact of natural disasters on agricultural production and farmers’ income. Agricultural operators need large amounts of financial support to expand the scale of production, buy modern machinery and equipment, and transform the traditional operation mode, and agricultural loans represent an important option to meet this funding need. China’s agricultural insurance and agricultural loans underwent great development over the past decade or so, with the support of various preferential policies from the government. Agricultural insurance has developed fast since the central government launched the agricultural premium subsidy pilot in 2007. Agricultural loans developed rapidly since the Central Bank of China launched a pilot project with small loan companies in five provinces in 2005.

In recent years, the pace of grain production and increase in farmers’ income in China showed a slowing trend. The extensive agricultural production mode, relying on factor inputs, is increasingly not in line with the needs of agricultural modernization and high-quality agricultural development. In the future, only by leading agricultural production with innovation, speeding up the transformation of agricultural economic development mode, improving agricultural productivity, and stepping up quality development can the benefits of agricultural production and farmers’ income be continuously improved. This goal cannot be achieved without the strong support of agricultural finance. Agricultural insurance and agricultural loans are important financial products for the industry, and they need to follow innovative development and play a more prominent role in China’s next round of agricultural transformation and development.

Since Schumpeter put forward the concept of “inno- vation” in the last century, the innovation paradigm has been evolving all over the world, from the previously closed innovation to today’s open innovation. The traditional closed innovation paradigm achieved great success; however, as the information technology and knowledge economy developed faster and faster, it became difficult for that paradigm to adapt to the times, so it was gradually replaced by open innovation. Open innovation has become the key for enterprises to obtain competitive advantages and for countries to promote economic development. China’s agricultural finance and agricultural industry need to actively promote open innovation, to jointly embark on high-quality development in the future.

How are agricultural insurance and agricultural loans linked to each other and the agricultural industry? Does their rapid development promote the development of the agricultural industry? How does the development of the agricultural industry affect agricultural insurance and agricultural loans? What should be done to consolidate and improve the coordinated development of agricultural insu- rance, agricultural loans, and the agricultural industry through open innovation? This study attempts to respond to these questions.

2. Literature Review

State Council of China (2012) promulgated and implemented the Regulation on Agricultural Insurance in 2013, which provides the following definition: Agricultural insurance refers to activity undertaken by insurance institutions to assume the liability of compensation for property losses caused by agreed natural disasters, accidents, epidemics, diseases, and other incidents suffered in planting, forestry, and animal husbandry and fishery production according to the insurance contract. Agricultural insurance is a risk mitigation mechanism that provides economic compensation for the losses suffered in the process of agricultural production. The agricultural industry is often impacted by natural disasters and market risks, and agricultural insurance should play an important role in hedging risks, stabilizing production, and increasing farmers’ income in the process of agricultural production. However, scholars have not reached a consistent conclusion about the relationship between agricultural insurance, agricultural production, and farmers’ income. Huang and Lv (2021) using the multiple intermediary effect model, proved that agricultural insurance has both direct and indirect effects on farmers’ income. On the one hand, it directly affects farmers’ income through loss compensation, and on the other hand, it indirectly promotes farmers’ income by encouraging them to increase and optimize the allocation of agricultural production factors. Ma et al. (2020) assessed the impact of agricultural insurance on rural residents’ income using the progressive double-difference method and concluded that it can promote increased income in the long term, promote the adjustment of rural residents’ employment choices, and increase the proportion of non-agricultural income at the same time. Zhang and Sun (2015) conducted a comparative study on the impact of agricultural insurance on the development of the agricultural economy. The results of the horizontal research in different provinces showed that agricultural insurance in most regions plays a significant role in promoting the development of the agricultural economy.

As the value chain of the agricultural industry increasingly extends to the secondary and tertiary industries, different standards and calibers regarding the definition of agricultural loans arose. Agriculture, forestry, animal husbandry, and fishery loans are agricultural loans in a narrow sense in the agricultural production link. The concept of rural loans is defined by urban and rural regional standards, and the concept of agriculture related loans is defined by the criteria of agricultural use, region, and loan subject. Agricultural loans play an important role in the expansion and reproduction of agricultural production activities, equipment renewal, and technological upgrades, which require a lot of capital investment. However, agricultural development must meet the requirements of credit capital to avoid risks and capital appreciation before it can be favored by credit capital. The reality is that it is often difficult for agricultural production and operation income to fully cover the loan cost and potential risks, which is also an important reason for the low availability of agricultural loans.

Hou and Du (2017) conducted an in-depth study on the availability of agricultural loans and noted that only when agricultural development is compatible with the purpose of credit capital appreciation can the development of the agricultural economy and the availability of agricultural loans be promoted and interact with each other. The agricultural industry in some developed countries in Europe and the United States is developed with strong profitability and anti-risk capability, which can effectively cover the loan cost and risk of credit funds. Therefore, the availability of agricultural loans is high, and the proportion of such loans in commercial loans is the highest. Hou and Du (2017) researched and evaluated the low availability of agricultural loans and the performance of agricultural loans serving agricultural production from the perspective of an industry comparison. Their research shows that the low availability of agricultural loans is due to the low capital return rate and an uneconomical credit scale, and most areas of agriculture production suffer from loan exclusion. Compared with other industries, poor performance is the main reason for the low availability of agricultural loans. Zhang and Wu (2017) conducted an empirical study on the short-term and long term effects of agricultural loans on agricultural economic growth and found that although such loans may have a negative impact in the short term, they have a significant positive impact in the long term.

Most research on the relationship between agricultural insurance and agricultural credit shows that they have a positive mutual promotion interaction. Liu and Zhi (2017) conducted an empirical study on the relationship between agricultural insurance and agricultural loans in Shandong Province, China, and concluded that they support each other to a certain extent and the level of coupling and coordination between them is gradually improving. Yuan and Tao (2019) conducted an empirical study on the fluctuation characteristics and interaction principle of agricultural insurance and agricultural loans in Shandong Province, showing that there is a mutual promotion and cooperative development relationship between the two, and the latter has a greater impact on the former than the former on the latter. Tang and Lv (2021) conducted an empirical study on the impact of agricultural insurance, agricultural loans, and their interactions on the improvement of agricultural productivity based on the data of 31 provinces in China. The conclusion was that the two depend on each other, and their interactions have a significant effect on the improvement of agricultural productivity.

Open innovation was first put forward by Henry Chesbrough (2003) of Harvard University 2003. It assumes that enterprises can and should make full use of internal and external resources to carry out technology R&D and innovation activities and promote the commercialization of innovation achievements combined with internal and external paths to the market. Piller et al. (2004) highlighted external resources for consumers and noted that open innovation is a process in which enterprises obtain feedback from consumers and continuously improve, modify, and innovate their products and services. Christensen et al. (2005) proposed that open innovation is the flow and integration of innovation resources such as knowledge, creativity, technology, and talents among enterprises, universities, and scientific research institutions. From the perspective of stakeholders, Chen and Chen (2008) noted that open innovation is a comprehensive multi-agent model involving various stakeholders. With the deepening of research on the open innovation paradigm, its connotation and reach are evolving, but its essence has not fundamentally changed. Zhou and Liu (2012) noted that the essence of open innovation is no longer to clearly distinguish whether innovation originates from inside or outside of the organization but to pay equal attention to external creativity and external commercialization promotion as well as internal creativity and internal commercialization promotion. Wang (2016) noted that the essence of open innovation is to remove the boundaries restricting resource flow, effectively integrate enterprises’ internal and external innovation resources, explore and develop corresponding commercialization mechanisms for innovation achievements, and share the new value created. It includes not only pure technological innovation but also business model innovation.

Chesbrough (2006) divided open innovation into inbound and outbound open innovation. The former refers to the flow of innovation resources from the outside into the enterprise and commercialization within the organization, and the latter refers to the flow of innovation resources from the inside to the outside and commercialization outside the organization. Gassmann and Enkel (2004) extended the open innovation model and put forward the concept of coupled open innovation, which refers to the internal and external interactions in the innovation process, and established the third open innovation model. Coupled open innovation combines the two innovation processes, outside to inside and inside to outside, and pays attention to the interaction of innovation activities between subjects and the cooperation in the process of developing and commercializing innovation. Coupled open innovation requires the matching and complementarity of resources between subjects to achieve complementary cooperation. Enterprises need to strengthen the two-way flow of internal and external innovation resources as well as interactions and cooperation with upstream suppliers, downstream users, competitors and partners, scientific research institutions, and the government, and cooperate to achieve open innovation. Open innovation adoption can help to improve a firm’s learning effectiveness in absorbing external knowledge, provide access to complementary knowledge residing in innovation partners, and enhance the distribution of risks among the partnering firms (Mehta et al., 2021).

Judging from the existing research results, while there are many studies on agricultural insurance, agricultural loans, and the agricultural industry, the vast majority focus on the effects of insurance or loans on the development of agricultural production, especially the income of farmers. There are not many studies on the three together, and even fewer on all three from the perspective of open innovation. The main contributions of this study are as follows: First, this study systematically investigated the three as a whole, analyzed the interaction between the first two and the overall interdependent and cooperative relationships of the three, and conducted a theoretical analysis of the coupled open innovation principle between the three. Second, this study took 15 provinces of China as the research objects and carried out data calculation and empirical research on the three factors, to provide policy suggestions for improving the coordinated development of agricultural insurance, agricultural loans, and the agricultural industry and for leading high-quality development through open innovation.

3. Research Background and Problem Statements

3.1. Agricultural Insurance and The Agricultural Industry

Agricultural production activities are extremely vulnerable to the impact of natural disasters and market risks. Agricultural insurance is a market-oriented operation mechanism that can effectively hedge the risk and help stabilize agricultural production and farmers’ income. When a natural disaster or market risk occurs, the insurance company will compensate the insured agricultural operators for the losses to help them resume production and support their income. On the other hand, agricultural insurance can effectively guarantee the level of agricultural production and income. It will encourage agricultural operators to form stable income expectations, increase their investment in various means of production, update their production equipment, carry out technological innovation, and promote the progress of agricultural technology, thus expanding the scale of agricultural production. In turn, expanded agricultural production will further increase the demand for the types and amounts of agricultural insurance products, promote insurance companies to follow up on product R&D and innovation according to changing customer demands, promote the development of the agricultural insurance industry, and form a good relationship of active interaction, coupled open innovation, and coordination between the two industries.

3.2. Agricultural Loans and The Agricultural Industry

Renewing agricultural production equipment and improving production efficiency and scale operation need abundant financial support. It is difficult for agricultural operators to achieve this completely by capital accumulation themselves. The investment of agricultural loan funds can alleviate the problem of insufficient capital accumulation in agriculture itself, promote the investment of various production factors, promote technological innovation, and improve the development level of agricultural production. The development of agricultural production and the continuous improvement of agricultural revenue will, on the one hand, improve the qualification and credit level of agricultural operators as borrowers and, on the other hand, stimulate their enthusiasm for production and thus seek to expand the production scale and business scope to obtain scale income. This will further increase the demand for the types and amounts of agricultural loans, promote agricultural credit institutions to carry out R&D and innovation according to customer needs and promote business development. There is also a relationship of mutual promotion and coupled open innovation between the two industries.

3.3. Agricultural Insurance and Agricultural Loans

Agricultural insurance can help agricultural operators mitigate the impact of natural disasters and market risks, guarantee the stability of production and income, and ensure the smooth repayment of loans, thus stimulating more demand for agricultural loan funds. Agricultural loans can not only help operators stabilize and expand the scale of production, but also increase the demand for agricultural insurance. Agricultural insurance institutions and credit institutions can also combine to develop financial products, share risks, and develop together. For instance, the safeguard function of agricultural insurance helps to increase the confidence of agricultural credit institutions in the operators’ ability to repay; in particular, products such as performance guarantee insurance directly provide credit enhancement conditions for agricultural operators to apply for loans, greatly increasing the probability of receiving a loan and the amount granted to them. In addition, agricultural insurance and loan institutions can share sales network channels, sell each other’s products on a commission basis or in combination, strengthen information exchange and sharing, handle more customer information, and make more scientific and reasonable lending decisions. Agricultural insurance and credit institutions have complementary assets needed by each other to carry out open innovation. There is a coupled open innovation relationship between them, including sharing innovation resources and cooperating to complete innovation development and commercialization.

3.4. Agricultural Insurance, Agricultural Loans, and The Agricultural Industry

Agricultural insurance and loans play important roles in the process of agricultural innovation and technological progress, promote the long-term healthy development of agricultural production activities, and ensure the income of agricultural operators. Moreover, there is a relationship of mutually reinforcing and coupled open innovation between the two. Agriculture plays a crucial role hence its growth has a positive impact on the growth and development of rural finance markets (Mago, 2014). As agricultural operators continuously enhance their risk awareness and transform their development concepts, they will keep seeking to promote the transformation of traditional agricultural production mode and carry out innovative activities using business models, production technology, and production processes, thus improving production efficiency and obtaining economies of scale. This would concurrently promote the innovative development of agricultural insurance and agricultural loans. Only by developing in a coordinated way and bringing out the best in each other can the three parties form a mutually reinforcing and positive relation- ship. The lack of backwardness of agricultural insurance, agricultural loans, and the agricultural industry by each party will restrict the development of the other two.

4. Research Methods and Materials

4.1. Indicator System and Data Processing

An indicator system was constructed based on the relevant literature and the availability of data in China. The indicator system reflects the development level of the three systems. The agricultural insurance system consists of four indicators: scale, density, depth, and compensation. The agricultural loan system also consists of four indicators: scale, proportion, the scale of agriculture, forestry, animal husbandry, and fishery loans, and scale of farmer loans. The agricultural industry system consists of five indicators: the scale of the agricultural industry, the added value of the primary industry, the scale of grain production, total electricity consumption, and income level in rural areas. As economic development levels decrease from the eastern to the western part of China, the economic scale and structure of different provinces show great differences. Fifteen provinces in China were selected as our research objects, five each in the eastern, central, and western parts. The other provincial administrative regions were excluded due to data unavailability or low comparability with respect to agriculture.

All original indicator data in the 15 provinces were normalized to eliminate the influence of differences in dimension and magnitude. Assuming that the number of selected provinces is m, the number of indicators is n, and the time period of each indicator is k years, the normalization procedure can be calculated by the following formula:

\(Y_{i j t}=\frac{X_{i j t}-\min X_{j t}}{\max X_{j t}-\min X_{j t}} * 0.99+0.01\)       (1)

4.2. Weight Calculation by Entropy Method

The indicator weight was calculated by the entropy method to objectively and accurately reflect the development level of each system and avoid the deviation caused by subjective weighting.

The specific proportion (P) of the \(i^{\text {th }}\) province’s \(j^{\text {th }}\) indicator in the t th year is:

\(P_{i j t}=Y_{i j t} / \sum_{i=1}^{m} \sum_{t=1}^{k} Y_{i j t}\)       (2)

The entropy value (e) of indicator j is:

\(e_{j}=-\frac{1}{\ln \left(m^{*} k\right)} *\left(\sum_{i=1}^{m} \sum_{t=1}^{k} P_{i j t} * \ln P_{i j t}\right)\)       (3)

The utility value (g) of indicator j is:

\(g_{j}=1-e_{j}\)       (4)

Table 1: Indicator System of Agricultural Insurance, Agricultural Loans, and Agricultural Industry

Figure 1: Agricultural Insurance Development in China

The weight (w) of indicator j is:

\(w_{j}=g_{j} / \sum_{j=1}^{n} g_{j}\)       (5)

The ith province’s comprehensive score (Z) of each system in the tth year is:

\(Z_{i t}=\sum_{j=1}^{n} Y_{i j t} * w_{j}\)       (6)

4.3. Coupling Model

A coupling model was constructed based on a physical concept, and the formula is as follows:

\(C=\sqrt[3]{\frac{\mathrm{AI} * \mathrm{AL} * \mathrm{AP}}{\left[\frac{\mathrm{AI}+\mathrm{AL}+\mathrm{AP}}{3}\right]^{3}}}\)       (7)

In the above formula, C denotes the coupling degree of the three systems, and AI, AL, and AP denote the comprehensive score of the agricultural insurance system, the agricultural loan system, and the agricultural industry system, respectively. The closer the value of C is to 1, the higher the coupling degree of the three systems and the better the synchronization. On the contrary, the closer the value of C is to 0, the lower the coupling degree and the worse the synchronization. The specific coupling degree evaluation criteria are as follows: When C is equal to 0, greater than 0 and less than or equal to 0.3, greater than 0.3 and less than or equal to 0.5, greater than 0.5, and less than or equal to 0.8, greater than 0.8 and less than or equal to 1, the coupling degree is uncoupled correlation, low-level coupling, medium-level coupling, high-level coupling an extremely high-level coupling respectively.

4.4. Coupled Coordination Model

The coupling degree can reflect the coupling level and synchronization degree of the three systems, but cannot reflect their development level. A coupled coordination model was constructed to further reflect the development level of the three systems based on the coupling degree. The closer the coupling coordination value is to 1, the higher the coordinated development level of the three systems; the closer the value is to 0, the worse the disordered development. The coupled coordination model is as follows:

\(T=\alpha \mathrm{AI}+\beta \mathrm{AL}+\gamma \mathrm{AP}\)       (8)

\(D=\sqrt{C^{*} T}\)       (9)

In the above formula, T is the evaluation value of the comprehensive development level of the three systems, D is the coupling coordination value, and α, β, and γ are the weight coefficients of the three systems, respectively. We consider that the three systems complement each other and have the same importance; therefore, we define ɑ = β = γ = ⅓. The specific coupling coordination level evaluation criteria are as follows: When D is greater than 0 and less than or equal to 0.2, greater than 0.2 and less than or equal to 0.4, greater than 0.4 and less than or equal to 0.6, greater than 0.6 and less than or equal to 0.8, greater than 0.8 and less than or equal to 1, the coupling coordination level is severely disordered development, disordered development, barely coupling coordination development, medium coupling coordination development and high coupling coordination development respectively.

5. Results and Discussion

The comprehensive scores of agricultural insurance, agricultural loans, and the agricultural industry in the 15 provinces from 2009 to 2019 were calculated after data normalization and weighting by the entropy method. The coupling and coupling coordination values of the three systems were calculated by the constructed coupling and coupled coordination models. The results are presented and analyzed below.

5.1. Analysis of the Agricultural Insurance System

The comprehensive scores of the agricultural insurance system in the 15 provinces are shown in Figure 1. As can be seen from the figure, all 15 provinces experienced a continuous rise in agricultural insurance development during the study period; Neimenggu ranked first, followed by Henan, Hunan, and Jilin. These four regions share a common feature: the agriculture industry plays an important role in their overall economic system, and agriculture insurance is more important for the safety of their economy. As the government gave more policy support, farmers’ willingness to buy insurance in these regions also increased. On the contrary, Fujian ranked last, with Yunnan, Zhejiang, Shanxi (western), and Guangdong preceding it in ascending order. Agricultural insurance development in these regions did not obtain sufficient support from the government and attention from farmers, because the agricultural industry accounts for a relatively low proportion of their overall economic system.

Comparing the three parts of China, the western part ranked first at the beginning and kept rising during the study period, because of the high degree of agricultural industry dependence and their support of agricultural insurance development. The central part rose the fastest, and it surpassed the western part during the last phase because its higher economic development meant more support for agricultural insurance. The eastern part ranked last during the study period because of the low degree of agricultural industry dependence.

5.2. Analysis of the Agricultural Loan System

The comprehensive scores of the agricultural loan system in the 15 provinces are shown in Figure 2. The figure showed that there were great differences in agricultural loan development among the provinces. Zhejiang ranked first, followed by Henan and Shandong. Zhejiang is one of the most developed regions in China, and Shandong and Henan are also relatively developed regions; as the government gave more policy support, their highly developed financial industry gave sufficient support to the agricultural industry. The agricultural loan development level in the remaining regions was relatively low; Jilin, Shanxi (western), and Gansu all showed a downward trend during the last phase due to the low development of their financial industry. In Guangdong and Fujian, the highly developed financial industry gave far less support to the agricultural industry than other industries due to the low degree of agricultural industry dependence.

Figure 2: Agricultural Loan Development in China

Comparing the three parts of China, the eastern part ranked first and kept rising during the study period because of the high economic development level, so the financial industry was able to give sufficient support to the agricultural industry. The central part showed an overall upward trend with the speed decreasing during the last phase. The western part ranked last and showed a downward trend during the last phase because the financial industry was not able to give sufficient support due to its low development level. In addition to policy support, the economic development level in the corresponding region is probably more important for the development of agriculture loans.

5.3. Analysis of the Agricultural Industry System

The comprehensive scores of the agricultural industry system in the 15 provinces are shown in Figure 3. The figure indicates that all 15 provinces showed an overall continuous rise in the agricultural industry during the study period; Guangdong ranked first, followed by Shandong and Henan. Guangdong is the most developed province in China. Its agricultural industry has obtained much support from other industries, and electrification and farmers’ income levels are high. Shandong and Henan are traditionally strong agricultural provinces, and their total output of grain and primary industry is the highest in China. On the contrary, Gansu ranked last with Shanxi (central) and Shanxi (western) preceding it in ascending order. These regions are less developed in agriculture, and their agricultural output, electrification, and farmers’ income level were the lowest.

Figure 3: Agricultural Industry Development in China

Comparing the three parts of China, the eastern part ranked first, followed by the central and western parts. This is the same as the order of overall economic development. Although the degree of dependence on the agricultural industry in the eastern part is low, its agricultural industry has obtained more support from other industries, especially the financial industry, than the central and western parts. As the overall economic development level decreased from the eastern to the central and western parts, the agricultural industry obtained less and less support from other industries. The agricultural industry in the western part was the lowest in China, as was the overall economic development level.

5.4. Analysis of Total Comprehensive Scores in 11 Years

The total comprehensive scores of the three systems in all 11 years are shown in Figure 4. Comparing the average scores of the three parts of China for agricultural insurance, the western, central, and eastern parts ranked first, second, and third, respectively. As the degree of dependence on the agricultural industry increases from the eastern to the western part, more government policy support is given to the agricultural industry, and farmers’ willingness to insure in the western part is higher, therefore the western part led in terms of agricultural insurance. For agricultural loans, the eastern, central, and western parts ranked first, second, and third, respectively. As the overall economic development, especially in the financial industry, rises from the western to the eastern part, more loan funds can be granted to support the agricultural industry. The agricultural industry in the western part obtained less loan support due to the low economic development, thus the eastern part led in terms of agricultural loans. For the agricultural industry, the eastern, central, and western parts ranked first, second, and third, respectively. This is the same order as agricultural loans. The agricultural industry in the eastern part obtained more support from other industries, thus achieving a higher development level. In terms of balanced development between the three systems, the central part ranked first, and the development levels of the three systems in the central part were almost the same. The development gap between the three systems in the eastern part was the largest.

Figure 4: Total Comprehensive Scores of Three Systems in 11 Years

5.5. Analysis of the Coupling Coordination Degree of The Three Systems

The coupling degree of the three systems in all 15 provinces stayed at an overall high level and reached the extremely high-level coupling state during the final phase. This indicates a high level of synchronization between the three systems in all 15 provinces, with agricultural insurance, agricultural loans, and agricultural industry interdependent and mutually reinforcing during the development process.

Figure 5 shows that all 15 provinces showed an overall continuous rise in coupling coordination degree during the study period. In 2009, Shandong and Henan reached barely coupling coordination development, Gansu ranked last, in the state of severely disordered development, and the remaining provinces were in the state of disordered development. In 2019, eight provinces reached the level of medium coupling coordination development; basically the three systems in these provinces entered a state of coordinated development. The coupling coordination value of Henan and Shandong was greater than 0.7, almost reaching the highest level. These are both strong agricultural provinces in China, and their overall economic development level is also relatively high. Agriculture insurance, agricultural loans, and the agricultural industry in these two provinces formed a mutually reinforcing relationship and entered a state of coordinated development. The remaining seven provinces reached barely coupling coordination development: Shanxi (western) ranked last, with Shanxi (central), Fujian, and Gansu preceding it in ascending order. The coupling coordination values of these four regions were all less than 0.5, close to disordered development. There is a low coordinated development level in these four provinces because either the agricultural industry did not receive sufficient attention or the low economic development meant insufficient support for the agricultural industry.

Figure 5: Coupling Coordination Degree of Three Systems in China

Comparing the three parts of China, the eastern part ranked first, followed by the central and western parts. This is the same as the order of overall economic development. The coordinated development difference between the three systems in the three parts of China indicates that agricultural insurance and loans are important for the development of the agricultural industry. Although the eastern part depends much less on the agricultural industry than the central and western parts do, the agricultural industry in the eastern part obtained more support from agricultural insurance, agricultural loans, and other industries than the central and western parts did, therefore achieving a higher development level. 

6. Conclusion and Suggestions

In this study, we conducted empirical research on the systems of agricultural insurance, agricultural loans, and the agricultural industry in 15 provinces of China and analyzed the relevant data from 2009 to 2019 by the coupled coordination model. The results show that the level of agricultural insurance development in the central and western parts was higher than that in the eastern part; however, it was quite the opposite for agricultural loans and the agricultural industry, for which the eastern part took the lead. This indicates that support from other industries, especially the financial industry, is needed even needed more to promote agricultural industry development, in addition to policy support from the government. This usually depends on the overall economic development level in the corresponding region.

The coupling degree of the three systems in the 15 provinces stayed at an overall high level, reaching the level of extremely high-level coupling. All 15 provinces showed an overall continuous rise in coupling coordination degree during the study period; 8 provinces reached medium coupling coordination development and 7 provinces reached barely coupling coordination development in the final year. The differences in the three systems’ coordinated development in the three parts of China verified that agricultural insurance and loans were important for the development of the agricultural industry, with the three systems interdependent and mutually reinforcing.

No province reached the highest coordinated development level until 2019, and some regions were still close to the state of disordered development. Innovative development is urgently needed to further promote coordinated development. Therefore, we put forward the following policy suggestions from the coupled innovation perspective to consolidate and promote the coordinated development of agricultural insurance, agricultural loans, and the agricultural industry in China.

6.1. Countermeasures and Suggestions for Agricultural Insurance

Insurance companies should be guided to strengthen the demand-oriented concept, carry out coupled open innovation based on cooperation with agriculture operators, further promote the innovation and development of agricultural insurance products, achieve full coverage of natural and market risks, and improve the fit between the supply side of agricultural insurance and the demand side of modern agricultural production. There should be efforts to increase publicity and education efforts, popularize knowledge of agricultural insurance, and enhance agriculture operators’ risk awareness and willingness to insure. In addition, efforts should be made to strengthen the link with the agricultural credit department, jointly develop agricultural financial products, and strengthen the interaction and sharing of information to form a joint force of agricultural finance to support development.

6.2. Countermeasures and Suggestions for Agricultural loans

Agricultural operators should be encouraged to cooperate in establishing cooperative financial organizations and improve the utilization rate of idle funds through mutual fund assistance. Active guidance is needed for the flow of online financial resources for the agricultural industry, giving full play to the advantages of big data technology and the unique advantages of internet finance, with efforts made to address information asymmetry, carry out innovative research to promote the development of agricultural credit products, complement the advantages of the traditional financial system, and guide more credit funds into agricultural production to boost the development of the agricultural industry.

6.3. Countermeasures and Suggestions for Coupled Open Innovation

The government should actively change its functions, formulate and improve the policy and regulation system to provide a good institutional environment for cooperation among government, industry, universities, and research institutions, strengthen the construction of public service platforms, promote information sharing across departments, chains, and regions, reduce transaction costs in the process of open innovation, and stimulate innovation vitality. Agricultural financial institutions should raise awareness of collaborative innovation, strengthen the flow of innovation resources and interactive cooperation between upstream providers, downstream users, and complementary partners to improve the success rate of coupled open innovation, and further promote the coordinated development of agricultural insurance, agricultural loans, and the agricultural industry.