After three-month arguments and demonstrations, the People?s Bank of China (PBOC), the nation?s central bank, has approved a financial reform scheme for Zhejiang Province?s Wenzhou City.
Wenzhou City will become a testing ground for China?s next round of financial reforms and will be responsible for providing experiences on new national financial reform mechanisms.
It is said that central bank governor Dai Xianglong made the decision after an inspection of Wenzhou City in August. In 1987, Wenzhou was the first city to carry out interest rate reforms. This year, the city has been chosen to pilot the introduction of floating interest rates in rural credit cooperatives.
The local media, quoting the words of a PBOC official, attribute the approval to the rapidly growing local economy. Average Personal Disposable Income in the city has reached 13,200 yuan (US$1,594) per year. Many products made in Wenzhou, mainly by private enterprises, have secured a large share of the domestic market. A large-scale economic zone focusing on light industry is taking shape.
Wenzhou?s financial industry is also maintaining a rapid rate of growth. By the end of November, RMB saving deposits reached 138.39 billion yuan (US$16.7 billion), while loans were at 90.02 billion yuan (US$10.9 billion). The ratio of non-performing assets is below 5 percent, much better than the Zhejiang provincial average.
Currently, eight out of ten national commercial banks have set up branches in Wenzhou, and the other two, China Everbright Bank and Minsheng Bank, are making preparations.
Due to the strong risks associated with resistance to change, Wenzhou is becoming a popular experimental ground for credit and loan innovations, and interest rate liberalization.
The new financial reform includes: establishing a small-loans market; innovating sound financial governance mechanisms; restructuring rural credit cooperatives; strengthening the support of ?Triple Agricultures?; further implementing interest rate reforms; setting up guarantor firms to support Wenzhou?s small and medium-sized enterprises; and accelerating financial product and service innovations.
(China.org.cn by Tang Fuchun, December 27, 2002)
