Back to its roots

Now, at least one state bank has had second thoughts about the rural market. The Agricultural Bank of China (ABC), the main financial service provider for farmers and agriculture in China, began to shift its focus back to rural areas during its shareholding reform, which started in 2007.

Yang Zaiping, executive vice president of the China Banking Association, said ABC should reform its rural financing department to take the lead in rural financial services.

An ABC official, who asked not to be identified, said that the bank would seek to provide financial services to farmers and agricultural enterprises as part of its back-to-the-roots campaign.

One important step in this process, he said, was that the bank launched credit cards for farmers in April 2008, which had been welcomed.

As of March, ABC had issued 14.95 million such bank cards with total credit lines of 24.4 billion yuan to farmers. As of March, about 1 million farmers had used these cards to finance 20.1 billion yuan worth of farm implements or on daily expenses.

ABC president Zhang Yun said at Peking University in Beijing on April 14 that by the end of this year, the number of the cards will total 30 million, with 23 million being issued this year witha credit line of 50 billion yuan.

These cards would cover 3.5 million rural households.

Another important step for ABC to go back to its rural roots were two village banks that it opened in Hubei Province and Inner Mongolia Autonomous Region on August 18.

ABC's moves have led other domestic banks to take a second look at rural markets.

Construction Bank of China, for example, won approval last year to establish a rural bank in Hunan Province.

CBRC vice chairman Jiang Dingzhi said that major commercial banks should adjust their credit and service models to reflect rural conditions as they opened more outlets in such areas. He said he expected major state banks would play a more important role in improving rural finance.

Zuo Xiaolei, an economist with China Galaxy Securities, said major domestic financial institutions should adopt a far-sighted strategy and explore the rural market.

Thirty years of reform

She compared the current financial situation in rural areas with that of the cities 30 years ago, at the dawn of China's reform and opening up drive. She argued that putting the same amount of effort into rural markets would lift them, within another 30 years, to the standards now prevailing in the cities.

She also called for more banks including city banks to join with major state-owned banks to explore and serve the rural market.

One city bank -- Nanchong Commercial Bank, based in Sichuan Province -- established the first village bank in Yilong County in the province in March 2007. And since the second half of last year, Bank of Beijing, Bank of Communications, Mingsheng Bank, Bank of Nanjing and other urban-based banks have set up village banks in rural areas.

Retired Bank of China economist Tan Yaling said Chinese banks had a better understanding of rural markets than their foreign rivals. These domestic banks had to seize the chance and not lose ground to foreign competitors, she said.

The source from HSBC said there would most likely be more cooperation than competition, because the growth of rural finance would be supported by all financial institutions.

Zhang said no financial institution alone could serve the whole rural market and competition would raise the level of rural bank services.

(Xinhua News Agency April 24, 2009)