Rural Finance in Poverty-Stricken Areas in the People's Republic of China: Balancing Government and Market

Abstract

Despite significant progress in the general financial reform of the People’s Republic of China, rural financial reform has been lagging. Current financial policy and models need to be examined and recommendations for future reform measures have to be provided. Local financial institutions represent the best choices in the financial system for small and medium-sized enterprises and farming households. Government agencies in the People's Republic of China (PRC) have proposed policies that would relax market entry criteria and allow the creation of diversified rural financial institutions. These measures will help improve PRC's financial market structure, promote better rural financial services, enable financing of labor-intensive economic activities, and promote socioeconomic development. This publication offers an overview of rural finance in the PRC, examines current financial policy and models, and offers recommendations for future reform measures.