A pilot program on advancing innovation in financial products and services in China s rural areas is to be launched in several provinces in the second half of this year to support the country s initiative of building a new socialist countryside, according to a document jointly released by the People s Bank of China (PBC) and the China Banking Regulatory Commission (CBRC) days ago.
The pilot program, which aims to improve rural financial services and satisfy the needs for financial services of the agriculture, rural areas and farmers, will be put into practice in China s major grain-producing regions or selected counties and county-level cities with solid economic fundamentals, said the Opinions of the PBC and the CBRC on Accelerating the Innovation of Financial Products and Services in Rural Areas, a document put forward by the PBC and the CBRC in a bid to further advance financial reform and institutional innovation in the country s rural areas.
In spite of recent progress achieved in innovating financial products and services in China s rural areas, problems remain in that rural financial products and services still lack variety and rural financial services need to be improved in terms of quality and efficiency to better meet local demands.
As the country continues to address issues like market access, financial services network and rural infrastructure, priority will be given to promote innovation in rural financial products and services in an effort to encourage greater agro-linked financing input from financial institutions and innovate agro-linked financial services mechanism, so as to improve rural financial services and drive economic growth in the countryside.
Major content of the Opinions consists of the following five points: first, vigorously promote micro-credit loans and joint guaranteed loans and expand loan coverage; second, innovate new means of guarantee to expand the scope of collaterals; third, develop order-based and insurance policy-based financial instruments to improve the efficiency of credit resources allocation and to diversify risks; fourth, allow small- and medium-sized agro-linked enterprises to issue collective bonds on the inter-bank market to broaden financing channels available for small enterprises; and fifth, improve the quality and efficiency of agro-linked financial services.
Six supporting measures are also set out in the Opinions to support the implementation of the pilot program: first, employ various monetary policy tools to establish an incentive mechanism for innovations in rural financial products and services; second, establish more funding sources for agro-linked financial institutions and diversify their risks by issuing asset-backed securities and credit derivatives on the inter-bank market; third, accelerate the building of rural payment system to further facilitate payment and settlement in rural areas; fourth, strengthen the building of rural credit information system to improve regional financial eco-system; fifth, improve and implement the market access policies encouraging innovations in rural financial products and services in accordance with the principles of easy access with stringent supervision and differentiated treatment ; and sixth, give play to the leverage role of fiscal funds and improve rural areas appeal to financial resources.
The Opinions stressed three principles that should be abided by throughout the pilot program, i.e. the program should take a market-oriented approach combined with policy support, adapt to local conditions, and optimize services with controllable risks.
According to the Opinions, the pilot program will be launched in the second half of 2008 in two or three counties with favorable conditions in each area, namely, the 6 central provinces and 3 northeast provinces, with the focus being laid on innovation and promotion of two or three financial products in each province. PBC provincial branches in pilot areas shall cooperate with local banking regulatory bureaus to coordinate and organize the implementation of pilot program in respective provinces. Local PBC branches at county level and local dispatched agencies of CBRC shall strengthen cooperation and communication with local fiscal, insurance and agriculture departments and make joint efforts to ensure that the pilot program will achieve the expected results.
