China has lowered the threshold for financial institutions to open outlets in rural areas, a move to help attract more funds to the countryside.

The Chinese Government is encouraging banks and industry including the private sector to boost their rural investment, according to a rule issued on Friday by the China Banking Regulatory Commission (CBRC).

It urged commercial banks to establish more outlets in rural areas. Meanwhile, farmers and small businesses are also being encouraged to set up credit cooperatives, according to a statement issued by the CBRC.

In a bid to attract more funds, county-based banks in rural areas only require 3 million yuan (US$380,000) to be established. Banks based in rural towns need only 1 million yuan (US$127,000) to be set up, according to the rule.

Farmers and small rural businesses require at least 300,000 yuan (US$38,000) in registered capital in order to set up credit cooperatives in rural towns, while 100,000 yuan (US$12,700) is needed in villages, the regulator said.

Taking effect from Saturday, the new rules will first be implemented in the provinces of Sichuan, Gansu, Qinghai, Hubei, Jilin, and the Inner Mongolia Autonomous Region, before being introduced in the nation's more prosperous coastal regions.

Domestic and overseas lenders wishing to open city-based branches in the first six areas must also establish outlets in counties and towns, said Zang Jingfan, the CBRC's head of co-operative financing.

The average per capita income in rural China stood at 2,760 yuan (US$349) in the first nine months of this year, less than one-third of the 8,800 yuan (US$1,114) earned by urban dwellers, according to the National Bureau of Statistics.

The Chinese Government is determined to boost the income of the nation's 745 million rural residents, using loans and increased spending on public works to help drive up rural incomes.

"China needs 15 trillion yuan (US$1.9 trillion) in new funds for rural areas by 2020," said Zang.

"The government wants to fill the gap in terms of financial services in rural townships because many banks have withdrawn to compete in cities."

Rural dwellers had less access to financial services than their urban counterparts, with average per capita borrowing standing at 5,000 yuan (US$640) at the end of 2005, less than 10 percent of the amount in cities.

China has 12 rural commercial banks, 76 rural co-operative banks and more than 20,000 rural credit co-operatives, according to data from the CBRC.

"The existing financial institutions can hardly meet farmers' needs due to their limited sources of funding," said Zhao Xijun, a professor at Beijing's Renmin University of China.
 
(China Daily December 23, 2006)