Reform of China's Rural Credit Unions : Policy Note

World Bank

Reform of China's Rural Credit Unions : Policy Note

2009

World Bank

The reform of the Rural Credit Unions (RCUs) currently faces a number of major inter-related challenges. These must be resolved if China is to create a 'modern rural financial system'. The key issues facing policy-makers are: Consolidating independent shareholder ownership in order to realize effective corporate governance and create sustainable commercial financial institutions; reshaping the relationship between provincial governments and the RCU system in order to bring to an end direct government administrative intervention in RCU management; preventing government subsidies and special policies, which are intended to ensure that RCUs meet policy goals to support the rural economy, from generating rent-seeking behavior and moral hazards that undermine commercial sustainability; and enabling the growth of a diverse range of rural financial institutions that would create competition and force greater efficiencies in rural financial markets. Policy reforms since 2003 have sought to address these issues, but they have yet to achieve their goal. The need for more change is widely recognized, and the authorities now have the opportunity to implement further reforms in order to create a flexible, diverse, efficient and responsive rural financial market that is both vibrant and disciplined.

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AGROVOC Keywords

accounting agricultural production agricultural products auditing bankruptcy banks commercial banks community development cooperative banks cooperatives developing countries diversification economic activities economic development economic policies employment farmer farmers financial institutions financial market government intervention households housing human resources income tax information management institutional development laws microcredit microfinance migrant workers mortgages opportunity costs profitability property rights remittances risk management rural finance small enterprises small farmers social capital social security social welfare sustainable development urbanization village villages

Bibliographic information

Publisher

Washington, DC

Other Subjects

Capital adequacy; Employee; Market value; Futures; Credit systems; Conflict of interests; Rural loans; Financial service provider; Government policy; Small loans; Turnover; Incentive systems; Tax relief; Opportunity cost; Consolidation; Banking services; Credit information; Npl; Comparative advantage; Formal banking; Small businesses; Loan guarantees; Donor support; Exit mechanism; Predatory lending; Financial markets; Environmental; Financial support; Financial service; Monetary fund; Information asymmetry; Shareholders; Provision of credit; Regulator; Bad debts; Debts; Social responsibility; Rural client; Remittance services; State banking; Rural financial institutions; Central bank; Deposits; Direct investments; Postal savings; Formal banks; Market entry; Micro-finance; Legal environment; Regulatory system; Producers; Lenders; Entry threshold; Loan applications; Return; Development of credit bureaus; Informal rural finance; Rural branches; Accounting systems; Trading system; Microfinance loan; Government funding; Credit unions; Financial expertise; Government policies; Banking sector; Small farmer; Interest rate controls; Local savings; Savings bank; Group guarantees; Administrative controls; Trading; Rural credit cooperatives; Commercial bank; Depositors; Regulatory authorities; Agricultural loans; Local economies; Loan default; Capital investment; Accounting services; Cooperative banking; Earnings; Financial institution; Crop failure; Credit information systems; Long-term interest; Urban economies; Low interest rates; Government supports; Government guarantees; Formal banking system; Collateral for loans; Risk controls; Capital adequacy ratios; Principal-agent problems; Dividends; Rural market; Investing; Guarantor; Cash payments; Borrower; Rural financial market; Moral hazards; Capital flows; Shareholder; Access to loans; External shocks; Remittance; Recapitalization; Soft budget constraints; Contractual obligations; Access to credit; Micro-finance institutions; Government subsidies; Credit bureaus; Deposit insurance; Local governments; Entry thresholds; Interest rate; Competitive credit; Loan decisions; Lack of competition; Rural credit cooperative; Rural cooperative banks; Supervisory board; Branch network; Micro-credit; Credit assessment; Guarantors; Loan; Informal credit; Boards of directors; Mortgage; Rural financial markets; Financial development; Financial management; Rural financial services; Loan agents; Financial reform; Micro-loan; Non-performing loans; Risk management systems; Post office; Government support; Government bonds; Development bank; Costs to borrowers; Banking system; Corporate governance; Collateral; Outstanding loans; Financial risks; State support; Reserve; Supervisory boards; Withdrawal; Agricultural bank; Regulatory framework; Local economy; Credit card; Smart cards; Rural financial system; Rural business; Loan insurance; Deposit; Market discipline; Financial performance; Tax incentives; Rural credit; Microfinance institutions; Post office savings

License

http://hdl.handle.net/10986/12719http://creativecommons.org/licenses/by/3.0/World BankCC BY 3.0 Unported

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