Without sufficient cash on hand, Xie Mingqiang has no idea how long it will take to complete construction of his house.

The brick structure was roughly erected in Tuanjie New Village, east China's Jiangxi Province. It cost the farmer all of his savings, but Xie won't be able to move in until he finds money to build walls.

With no property, a rural bank denied Xie a loan because he didn't have valid assets to mortgage.

"Many Chinese farmers do not have stable income for credit and sustainable payment ability. This is why we are still cautious to give lending," said Xiao Siru, chairman of the Jiangxi Association of Rural Credit Cooperatives.

Xie's dilemma is an example of a bigger problem in rural China- the government wants to stimulate spending but people don't have money to spend.

For example, Chinese Premier Wen Jiabao emphasized the importance of expanding rural consumption in his government work report at the opening of the second session of the 11th National People's Congress earlier this month.

He said measures to do this would include accelerating development of markets for second-hand cars and car rentals as well as encouraging retailers to open stores in more townships and villages.

Millions of farmers like Xie don't have enough cash to build their own homes yet alone buy things like cars- even if they are second-hand.

In order to help farmers and increasing consumerism, the Chinese government reformed its banking system in 2006 to encourage financial institutes to expand lending. The China Banking Regulatory Commission (CBRC) relaxed the conditions of entry for banking institutions in rural areas. Besides China's state-owned banks, investors who want to set up a credit cooperative in the countryside could now do so with a registered capital as low as 100,000 yuan (US$14,626). Jiangxi province was the test site for the reform.

Xiao Hongsheng, a villager in Ertang Village in Jiangxi, was among the first group of farmers to benefit.

He borrowed 30,000 yuan from a credit cooperative to build a two-story house in 2006. His neighbors were still living in dried mud-brick bungalows.

After Xiao's example, more than 200 others in the village borrowed from rural credit cooperatives to build new houses, said village head Wang Daobing.

"Credit consumption is taking hold in China's countryside. The repayment rate of farmers' housing credit in Jiangxi is well above98 percent," said Xiao Siru, the association chairman.

Since rural lending was made easier, more than 940 million yuan has been borrowed by 45,130 rural families to build homes in Jiangxi as of February this year, he said.

Besides housing, Xiao added, educational costs were another reason people in rural areas borrowed money.

The credit system in the province has provided 145 million yuanin loans for 8,000 students to continue higher education since 2006.

"Credit consumption is an encouraging phenomenon when tapping into China's vast rural market," said Yin Xiaojian, deputy head of the Rural Economy Research Institute of the Jiangxi Provincial Academy of Social Sciences.

Rural lending has since expanded to all of China with credit cooperatives popping up in countryside.

However, low profits and lending risks are still barriers for financial institutions to be more aggressive in exploring the market, said Yin.

China's rural per-capita net income reached 4,761 yuan in 2008, as compared to 15,781 yuan of per-capita disposable income for urbanites, according to the Premier's report.

The Chinese government has recently promised more money to help stimulate the rural market.

Premier Wen said central government spending on agriculture, farmers and the rural areas would total 716.1 billion yuan (US$104.6 billion) in 2009, a year-on-year increase of 120.6 billion yuan.

The money would be used to expand direct agricultural subsidies to farmers, popularize agricultural science and technologies, and improve infrastructure facilities such as roads.

(Xinhua News Agency March 18, 2009)