Rural financial markets and institutions: New developments

Abstract

Continuous declines in the growth rate of farmers' incomes and widening income gaps between urban and rural areas since the early 1990s have renewed interest in China's agricultural and rural development. Rural fiscal and taxation policies, including the massive debts owed by the township and village administrations, and rural financial policies have topped the agenda for further rural economic reforms in 2003. The Central government has been urged to reduce the ever-increasing burdens on farmers through fiscal and taxation reforms and to provide more credit for rural development by introducing new reforms to rural financial institutions and markets. China's rural financial market is dominated by formal rural financial institutions, especially in the savings markets, as the deposits of formal financial institutions are insured by the state. The formal financial market and its institutions are highly regulated, with government regulations on rates of interest, market entry and exit, financial products and lending methodologies. Like their counterparts in urban areas, China's rural financial institutions have for a long time been marred by poor financial performance and high proportions of non-performing loans. Rural financial institutions in China can be divided into formal and informal institutions. Formal rural financial institutions in China consist of the Agricultural Bank of China (ABC), the Agricultural Development Bank of China (ADBC), rural credit cooperatives (RCCs) and Rural Postal Savings (RPS). Of them, ADBC is a 111 This content downloaded from 125.163.240.223 on Wed, 17 Jan 2018 01:18:32 UTC All use subject to http://about.jstor.org/terms