Rural Finance Reform in China

This paper examines the current status of rural finance demand and supply in China. It identifies existing issues and constraints, and evaluates ongoing rural financial reform in the country. The paper also explores suitable roadmaps to develop a well-functioning and sustainable rural finance system. China's current financial structure does not support rural areas adequately. As a result, many farmers and rural businesses cannot access capital. Accelerating rural financial reform and making it easier for rural people to access capital are key elements of the countrys overall financial system reform effort. It also aims to create the “"new socialist countryside"” to improve agricultural production, people's living conditions and public administration in rural areas. The paper states that an enabling environment should be created to support policy on discounted agricultural loans and favorable tax and monetary policies. To strengthen the institutional system of rural finance in China, the government should:

• Expand scope of qualified collaterals and study feasibility of new types of collaterals;
• Accelerate development of a rural insurance system and expand the scope and amount of subsidies for commercial agricultural insurance;
• Continue reform on interest rate liberalization.