The long-awaited experimental reform plan for China's more than
30,000 rural credit cooperatives has finally won approval from the
State Council.
The reform will have an impact both on the cooperatives'
property right and regulatory schemes. It will be implemented
immediately in eight pilot areas, the China Banking Regulatory
Commission (CBRC) said yesterday.
The leading areas are Jilin, Shandong, Zhejiang, Guizhou,
Jiangxi, Jiangsu and Shaanxi provinces and Chongqing
Municipality.
The cooperatives in these regions will be able to reform their
property right schemes according to regional conditions.
Instead of sticking to the traditional cooperative structure,
they can choose to adopt one of the three property right schemes on
offer -- a shareholding system, a market economy-based cooperative
system or a combination of both.
That will enable some co-ops, especially those in regions where
industry is more developed, to upgrade into shareholding commercial
banks, analysts say.
But it also allows flexibility for those which are not able to
grow into commercial banks.
By introducing the new shareholding structure, the co-ops will
attract more diversified investors, said Qin Chijiang, a central
bank consultant and deputy secretary-general of the Finance Society
of China.
It will encourage rural residents and other investors to put
more into the co-ops and take more initiatives to supervise the
operation of the cooperatives.
Moreover, the regulatory system on the co-ops will also be
revitalized, according to the reform plan.
Many of the co-ops' management and supervisory functions will be
handed over from the financial authorities to local provincial
governments. They will supervise the operation of the co-ops, deal
with risk prevention and help them recover loans.
The CBRC will shoulder the financial supervision of the co-ops,
which are still part of the overall rural financial system.
"The new regulatory scheme will give local governments more
liabilities to oversee," said Qin.
Experts say the complicated reform will require better
cooperation among various government departments.
Meanwhile, the authorities will also provide a series of
preferential policies to help the co-ops get rid of
long-accumulated bad loans. They include new loans and special
bills issuance from the central bank, fiscal subsidies and tax
exemptions. And the co-ops in the pilot regions will be able to
further float their lending rates.
But to build a healthy rural financial system is not just about
reform, said Qin.
It will also need more comprehensive reform by the overall rural
financial institutions and repositioning.
(China Daily August 20, 2003)