China's central bank is considering further liberalizing
interest rates in rural areas in order to improve financial
services.
The remark was made by Jiao Jinpu, deputy chief of the research
bureau under the People's Bank of China, yesterday at an online
interview at the Chinese government website, www.gov.cn, after a
netizen in Heilongjiang Province complained that lending rates at
rural cooperatives kept surging.
According to Jiao, there are two concerns around high lending
rates in rural areas.
First, due to higher costs and greater risks of granting loans
in rural areas, financial institutions must keep lending rates at a
certain level to cover costs.
Second, rural cooperatives have total control of lending rates
because of insufficient competition in rural financial markets.
"By liberalizing interest rates, more reasonable, balanced rates
will be set for both rural borrowers and financial institutions,"
Jiao said.
He said the government supports the establishment of diversified
financial institutions that solve rural banking problems such as
low network coverage, short financial supply and insufficient
competition .
"The next step is to moderately adjust and lower entrance
requirement for rural financial institutions," Jiao said.
In late December, the China Banking Regulatory Commission
launched pilot program in six provinces, lowering the threshold for
financial institutions to operate in rural areas.
Under the program, more than 20 village banks, lending companies
and rural mutual cooperatives have been set up.
(China Daily June 8, 2007)