Research and reports

Galaxy Futures’ Financial Innovation Helps Targeted Poverty Alleviation of "Agriculture, Rural Areas and Farmers"

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(Provided by China Galaxy Securities, 2020)

Summary

As a leading futures company in the industry, Galaxy Futures actively responds to the call, based on the industry characteristics, constantly plays its professional advantages in targeted poverty alleviation, deeply explores the innovative path of providing services for "agriculture, rural areas and farmers". It does not forget the original intention to serve the real economy, bears in mind the responsibility and mission of the state-owned enterprise, actively explores a new model of agricultural risk management, establishes a long-term mechanism for poverty alleviation, and truly change the "blood transfusion function" to "hematopoietic function", so as to achieve green and sustainable growth.

I. Background and financial demand analysis

(I) Policy Guide

Since the 18th National Congress of the Communist Party of China, the Central Committee and the State Council have set poverty alleviation at unprecedented new heights. "Insurance + Futures" has been written into No. 1 central document for 5 years in a row, which fully indicated that the cross-market financial innovation has become an effective model for the financial market to support the development of "agriculture, rural areas, and farmers" and serve the structural reform of agricultural supply side in China in recent years, and plays an important role in serving the strategy of national poverty alleviation and rural revitalization.

(II) Jingning in Gansu Province

Jingning County in Gansu Province was a state-level poverty-stricken county and one of 23 deep poverty-stricken counties in Gansu Province. Its local natural conditions are very poor, and drought, waterlogging, wind, hailstones and other natural disasters frequently occur. The planting depended on the weather, the cultivation had high risk, and the task of getting rid of poverty was very arduous. The poverty alleviation system of CIC Galaxy has been actively carrying out the social responsibility of state-owned enterprises, working together with the government of Jingning County and helping to build lucid waters and lush mountains to obtain more treasures.

II. Specific measures and work highlights

(I) Led by Party construction to promote the political stand in poverty alleviation

Since 2016, Galaxy Futures has set up a poverty alleviation team to actively carry out the work of targeted poverty alleviation. In May 2019, in order to further promote the development of poverty alleviation work and accelerate the formation of a multi-level, multi-channel, and all-around poverty alleviation working pattern, the company has set up a leading group of poverty alleviation work led by the party secretary. At the same time, the company set up a first-level department production integration division in charge of poverty alleviation work, clarify mission objectives, strengthen supervision and assessment, compact the responsibility layer upon layer, so as to provide a strong organizational guarantee for Galaxy futures to serve the national poverty alleviation strategy.

(II) To focus on the poverty alleviation work of "insurance + futures" in line with local conditions

Up to now, Galaxy Futures has carried out more than 30 "insurance + futures" financial poverty alleviation projects in 18 cities and counties in 12 provinces, involving 9 categories of agricultural products such as corn, soybean, apple and cotton, and provided risk guarantee for 500,000 tons of crops for an accumulative total of 56,000 households (about 28,000 of which were poor households and have set up archives and cards). With a nominal principal of about RMB 2 billion, RMB 28.7254 million of poverty-related funds (premium advance + donation) has been invested, and the compensation for price insurance payments alone accounted for RMB 34.5 million. In 2019 and 2020, Galaxy Futures participated in and complete 23 "insurance + futures" pilot projects, 12 of which involved targeted poverty alleviation and benefited 15,234 poor households with archives and cards.

(III) To achieve a steady income increase of the poor households by taking multiple measures

In addition to giving full play to the professional advantages of risk management to carry out financial poverty alleviation, Galaxy Futures also actively carried out industry poverty alleviation, education poverty alleviation and consumption poverty alleviation, and took various measures to help the poor households increase their income steadily. In regard to the industry poverty alleviation, Galaxy Futures has successively carried out a series of assistance activities in poverty-stricken areas such as Yanchang, Shaanxi, Yuxian, Hebei, Maigaiti, Xinjiang and Tongbai, Henan, etc., and provided a cumulative amount of funds of nearly RMB 3 million for the construction of the local greenhouse, cultural infrastructure, and other projects. In regards to the education poverty alleviation, the Galaxy Futures helped build the Galaxy Primary Schools in Jianchuan, Yunnan and other poverty-stricken areas, and held more than 20 business training in many poverty-stricken areas to help thousands of poor households understand the risk management knowledge. In regards to the consumption poverty alleviation, Galaxy Futures has successively launched consumption poverty alleviation activities in Taihu Lake, Anhui Province, Yudu, Jiangxi Province, and other poverty-stricken areas, and has purchased more than RMB 500,000 of characteristic agricultural products since 2016.

III. Results and impacts

(I) To continuously innovate and explore the way of targeted poverty alleviation

In the 2019 and 2020 mid-term poverty alleviation work assessment, Galaxy futures ranked the fourth in the industry that was the best record in history, which indicated that the party committee’s core role effect on the leading of poverty alleviation was outstanding. In 2020, Galaxy Futures took the lead in implementing the pilot projects of "insurance + futures" for pig feed cost index and laying hen feed cost index in Guangdong, Guizhou and other places, which effectively control the risk of local farmers feed costs from rising too fast.

(II) To help Gansu Jingning achieve high-quality lifting out of poverty

Under the guidance of superior’s decision-making deployment and support, Galaxy Futures was based on its own professional advantages, took financial poverty alleviation, industrial poverty alleviation, education poverty alleviation, and consumption poverty alleviation as the main means, and took multi measures to targeted poverty alleviation. With the joint efforts of all parties, on February 21st, 2020, Jingning County officially announced its withdrawal from the national poverty-stricken county series. Galaxy Futures has been expanding pilot scale, innovated "insurance + futures" poverty alleviation model, gradually introduced leading enterprises, banks, agricultural guarantee and other market subjects involved in it.

IV. Experience summary and policy suggestions

(I)"Insurance + Futures" has great potential in poverty alleviation

"Insurance + futures" has played an important role in serving the "Agriculture, Rural Areas and Farmers" and poverty alleviation, and could really bring vitality and vigour to the poverty-stricken areas. The poverty alleviation model of Gansu Jingning was a successful case of Galaxy Futures in exploring the path of targeted poverty alleviation, and also a replicable and extensible new path for poverty alleviation. Taking the characteristic industries in the poverty-stricken areas as the leading role, Galaxy Futures focused on promoting the characterized poverty alleviation work of "insurance + futures", integrated the poverty alleviation work of industry, education and consumption, and took multi measures to help poverty alleviation.

(II) To consolidate the long-term mechanism and combine the efforts to fight poverty with the revitalization of rural areas effectively

Galaxy futures will continue to improve the company's poverty alleviation organizations, strengthen the overall leadership of the company's Party Committees over poverty alleviation, deeply implement the decisions and arrangements made by the Central Committee of the Party and the Party committees at higher levels, and fundamentally guarantee the continued progress of poverty alleviation work. It will combine poverty alleviation and rural revitalization effectively, pay attention to the long-term mechanism for helping poverty, stimulate endogenous momentum, and fundamentally prevent the return of poverty.

(III) To coordinate poverty alleviation resources and strive to meet the basic needs of backward and remote areas

For backward and remote areas, Galaxy futures will first carry out in-depth local research, understand the core needs of local farmers, accurately identify the low-income reasons for local farmers, widely carry out agriculture, rural areas and farmers training for futures market services, "insurance + futures" business training and other special training, rely on the local regional characterized resources and explore the road of poverty alleviation, so as to achieve green sustainable growth.