Financial services: Vital path to revitalize rural China

An aerial photo of a water way in Qingyuan village, Shigu township, Yongchun county, southeast China's Fujian province, on Jan. 28, 2019. [Photo/Xinhua]

Agriculture, the rural areas in general and farmers in particular (referred to as "San Nong" in Chinese) are a vital focus in Chinese economic and social development.

A fully developed countryside is an important part of the Chinese Dream for national rejuvenation. Financial services and accompanying supports are keys to economic and social development.

Related Chinese authorities unveiled a guideline on January 29 in line with the latest policies on rural revitalization to enhance the role of finance in rural development and provide a policy assurance for rural revitalization.

Goals of rural revitalization

The guideline sets goals concerning the provision of finance services in rural areas. To be specific, short-run goals focus on scientific and feasible methods covering the following: intensifying financial support for targeted poverty alleviation, increasing related supportive financial resources, improving rural financial services and enhancing the governance and service ability of financial institutions.

The medium- and long-term goals involve planning and orientation, focusing on establishing and completing a relevant financial service market, organizational and product-based systems, building a modern rural financial system and ultimately realizing the rational and orderly allocation of financial resources as well as urban-rural equality of financial services.

The guideline will leverage more financial resources to facilitate rural revitalization. China had 1,427 rural commercial banks by the end of 2018, an increase of 165 compared with the previous year, according to the China Banking and Insurance Regulatory Commission. Village banks grew from 1,562 in 2017 to 1,616 last year. There were a total of 4,588 banking institutions operating at the end of 2018, a year-on-year gain of 39.

Principles of financial service

To achieve the goals previously mentioned, the guideline establishes principles for implementation, such as market-oriented operation, institutional reform, policy support and risk control.

Concrete measures include fostering the application of new technology, enhancing financial infrastructure construction and promoting new payment methods such as mobile payments in rural areas, and setting up a multi-channel fund supply system giving full play to the role of the financial market covering equities, bonds, futures and insurance, etc.

To ensure effective implementation, the guideline also proposes to improve the related policy system, encourage financial institutions to provide continuous services for rural revitalization with corresponding assessment of effectiveness at regular intervals.

Assurance to effective implementation

The guideline offers a promising future for the financial service and associated support network in promoting rural revitalization. However, the outcome will be based on the following:

Optimizing business operators

The guideline proposes to focus on the financial services for new agricultural business entities and small farmers, effectively meeting the funding needs of their business development. According to the characteristics of different operators, a hierarchical financial management system for agricultural business entities is being established.

Encouragement will be given to new agricultural business entities such as family farms, farmer cooperatives, agricultural socialized service organizations and leading enterprises to realize scale operations through various modes, such as land transfer, land shareholding, and productive custody services, while controlling the risks involved.

The guideline also encourages the development of agricultural supply chain financing, integrating small farmers into modern agricultural production systems, strengthening the interest linkage mechanism, and relying on core enterprises to improve the viability of small farmers and new agricultural management entities. It supports the development of an agricultural productive service industry and promotes realization of agricultural savings and efficiency.

Furthering reforms on property rights

The development of rural finance still needs further advancement in rural property rights reform. The guideline proposes to cooperate with reform of the rural land system and the reform and deployment of the rural collective property rights system, accelerating the construction of supporting mechanisms such as confirmation of power registration, value assessment, transaction flow, disposal and realization of cash.

An aerial photo of the modern rice plantation in Xiaogang village, Fengyang county, east China's Anhui province, on Sept. 27, 2018. [Photo/Xinhua]

At the same time, it seeks to actively promote the mortgage loan business of the rural contracted land, combined with the reform to separate the homestead property right into three categories – collective ownership, contractual rights and tradable land-use rights. The farmer property rights mortgage loan business sector is being promoted according to law, along with the collective land use rights and collective assets. Compliance is being collateralized to promote the organic connection of rural land assets and financial resources.