Abstract: The rural cooperative economic organization bridges the farmers and the market and the competition. It is one of the factors that promote rural economic development and increase farmers' income. This article analyzes the marketdemand induced impetus of the development of rural cooperative organization from three aspects, which are the scale management of land, saving of the market transaction fare and the protection of farmers' interest, using the new institutional economics. And then it analyses the defects in external institution supply from the following aspects: the institutional environment and situation, the present accumulation of scientific knowledge, the present institutional arrangement, the transferring cost of organizational institution and the informal institutional arrangement, as well as in the internal institution from the property rights and organizational institution. At last, the article puts forward policy advice to promote the development of cooperative economic organization, including two pieces of advice. One is that the government, aiming at serving for “rural areas, agriculture and farmers”, should allow and guide the cooperative organization to innovate the property rights institution and carry out various kinds of organizational innovation. The other is that the government should provide institutional service for the cooperative organization as much as possible.

Key words: rural cooperative economic organization, marketdemand induced, institutional supply, property rights, institutional service