Efforts to reconstruct the much-weakened financial system in
China's vast rural areas are poised to pick up speed in the coming
months, analysts said.
The China Banking Regulatory Commission has given top priority to
rebuilding the rural financial system, which has become weaker in
recent years despite efforts to reform it.
The commission was set up last month and took over some regulatory
functions of the central People's Bank of China.
Feng Xingyuan, a researcher with the Agricultural Research
Institute of the Chinese Academy of Social Sciences, said:
"Inadequate credit support for county-level economies has been
widespread in recent years, which has impeded the structural
readjustment of the rural economy.''
In
a bid to sharpen their competitiveness in the face of fierce
foreign competition, China's four State-owned commercial banks --
the Agricultural Bank of China, Bank of China, China Construction
Bank, and Industrial and Commercial Bank of China -- have withdrawn
from most counties and rural areas to refocus on more profitable
operations in the big cities. This has left the burden of financing
agricultural needs with rural credit co-operatives.
But the rural credit co-operatives are already in dire straits.
Their non-performing loans stood at 515 billion yuan (US$62
billion) at the end of last year, a staggering 37 per cent of their
total outstanding loans.
Worse still is the situation with the widely scattered postal
savings outlets. For historical reasons, these outlets have the
privilege of redepositing funds with the central bank for a high
rate of interest and they are siphoning a huge chunk of rural
savings away from the countryside.
The central government has taken steps to remodel such
co-operatives, reorganizing them into bigger co-operatives or into
banks. The most recent step was the establishment in March of the
first rural co-operative bank in East China's Zhejiang Province, a
combination of a joint-stock structure and co-operative
mechanisms.
However, Qin Chijiang, deputy secretary-general of the China
Society of Finance, said: "The establishment of such institutions
is just a good start. The issue of rural financing is a matter of
overall economic policy.''
Industrial policies should be revised to enable the structural
upgrading of the rural economy, he said, and preferential tax
policies need to be formulated for farmers and businesses to
support innovative agricultural technologies.
Economists have also called for tax incentives to redirect
commercial loans to rural areas, further reform of credit
co-operatives to enable them to play a stronger role in supporting
farmers and agriculture, as well as a lower interest rate on
redeposited funds from postal savings branches.
(China Daily May 10, 2003)