PBoC publishes “2009 Report on Regional Financial Operations in China”

On June 8, 2010, the People’s Bank of China (PBoC) published the “2009 Report on Regional Financial Operations in China” reviewing the financial sector in each of China’s provinces in the last year. The report comprises of an overview of trends and movements in China’s financial markets, as well as more-detailed provincial profiles and statistics. In the country overview, specific details were provided regarding rural finance. Some important figures relating to rural economy showcased in the report include: 

• The annual value-added of the primary sector reached RMB 3.5 trillion, increasing by 4.2%.

• Income of rural populations rose on average to RMB 5,153, reflecting a real growth rate of 8.5%.

• Fixed assets in rural areas grew by 27.5%.

• Retail sales of consumers good rose by 15.7% in county-level and smaller districts 

In collaboration with the Central Government, county-level financial offices are working to develop the rural financial sector through the following actions:

• Improved policy platform which pushes for a friendlier environment for increased capital to agriculture, rural areas and farmers. In 2009, increased support from FIs led to an increase of lending for agriculture-related activities by 34.8% to RMB 9.1 trillion.

• The development of innovative services to meet demand for financial services and products in rural areas. This includes:

• Promote the expansion of accepted forms of collateral beyond typical types such as order contracts, land management rights etc.

• Creation of new credit services to reach more clients and all spectrum of agriculture-based industries;

• Practice credit evaluation and promote unsecured loans;

• And increased innovation on services.

In 2009, over 150 financial products and services were introduced by FIs in over 16 provinces.

• Paying close attention to the people’s livelihood and subsequently improve financial services to boost rural economy and social dynamics. In 2009, many provinces offered its residents various financial support such as:

• Business loans for returning migrant workers;

• Programs to promote clean-energy and safe-drinking water through microfinance;

• Student loans;

• Construction loans to farmers for housing;

• Business loans for women;

• Disaster-relief loans in earthquake-stricken areas etc.

By 2009 year-end, total loans from banking institutions to rural small-to-medium sized companies reached RMB 2.6 trillion, accounting for one-third total increase in agriculture-related loans.

• Strengthen the financial system and improve protection of financial services to support agriculture economies. This includes:

• Establishing “model-regions” of financial involvement to serve as an example for successful financial inclusion. For example, Baise city of Guangxi province showcases successful rural financial reform results.

• Strengthen rural credit systems. By the end of 2009, out of the 2,682 towns in China, 2,372 towns have begun establishing credit records for local farmers under their jurisdiction. 2,105 of these towns have established a credit evaluation system; creating credit profiles for 110 million households whose loan balances reach approximately RMB 1 trillion.

• Expand financial services to smaller towns. By 2009 year-end, the number of towns without financial institutions decreased from 2,945 to 2,792. Over the course of 2009, the number of towns without any access to financial services decreased from 708 to 342.

• Lastly, to improve access channels to payment services. FIs are actively seek to adopt technology to help facilitate payment channels, such as using POS technology which will add convenience for loan officers in collecting payments.

In the report, the PBoC states that in order to develop financial support for agriculture, rural areas and farmers, focus should be centered around: 1) pushing for all levels of government to support and promote a favorable environment; 2) FIs should promote innovative financial products and services; and 3) agriculture microinsurance schemes should be developed. 

In 2009, new rural financial institutions developed at a rapid rate; 43 Rural Commercial Banks, 195 Rural Cooperative Banks and 2,054 Rural Credit Cooperatives (RCCs) were established. One area of significant growth was the growth in Microcredit Companies (MCCs). For example, 73 new MCCs in Guangdong province, 64 in Chongqing City and 56 in Shaanxi province were established over the course of 2009. In Ningxia Autonomous Region, an area stricken heavily by poverty, mutual funds groups increased from 108 to 428. The report also highlighted the reform of Rural Credit Cooperatives (RCCs) as a significant development in 2009. At year-end, the percentage of non-performing loans from RCCs stood at 7.4%, representing a 0.5% decrease. RCC deposits totaled RMB 7 trillion while the total loan balance reached RMB 4.7 trillion; accounting for 12% of the nation’s outstanding loan balance.

A full version of the report (in Chinese) can be downloaded below.