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Abstract

The root causes of subprime crisis are analyzed based on the introduction of the definition and features of subprime mortgage loans: firstly, a loose financial supervision and regulation environment leads to weak risk awareness; secondly, the highly complex financial products enlarge the risk. Taking into account that our rural finance is characterized by vast territory, scattered distribution of population, small economic scale and insufficient mortgage, it is pointed out that rural finance has different development rules and patterns from urban finance. On the basis of introducing that there is an insufficient amount of formal finance in our rural finance and our informal finance is under a long-term suppression, the great significance of financial innovation to rural finance is discussed: firstly, it effectively increases financial supply; secondly, it gradually regulates and develops the informal finance. The enlightenment of subprime crisis to our rural financial innovation is explored: firstly, financial innovation is the driving force of rural financial development; secondly, to strengthen risk awareness is a prerequisite for financial innovation; thirdly, a flexible and effective supervision and regulation system is an effective approach to preventing financial risks.

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