The banking system in China's rural areas cannot cater to demands of agriculture and the development of rural economy, according to the finding of a recentsurvey made by the Standing Committee of the National People's Congress (NPC).

The survey on banking support to farmers was submitted Thursdayto the ongoing meeting of the NPC Standing Committee, China's top legislature for deliberation.

In early May, the special survey group, headed by Vice Chairmanof the NPC Standing Committee Cheng Siwei, held a seminar on the banking support to farmers in Beijing and then went to six provinces for further studies.

In recent years, the Chinese central government and local governments at all levels have intensified their support to rural areas by issuig more loans to farmers, said Fu Zhihuan, chairman of the NPC Financial and Economic Committee.

But he also acknowledged that the banking institutions in ruralareas must face up a large number of clients who are usually limited in their production scales. Farmers are often in short of mortgages and their incomes hinge on local weather condition. All these characteristics result in the high cost and greater risks ingranting loans to farmers, thus affecting banks' interest and enthusiasm for loaning to farmers.

So he acknowledged that the current banking system in rural areas could not cater to the demand of farmers and agricultural development and, in fact, become one of major hindrances to the economic growth in rural areas.

The survey showed that the state-owned banks had closed many oftheir branches in rural areas and recovered the loan rights of their branches, whose main task has now been to attract deposits instead of granting loans. A large amount of money drawn from rural areas had been poured into hot businesses or industries in urban areas, which usually enjoy higher profit ratios.

The local branches of the Rural Credit Cooperative of China, the major banking institution in China's countryside, are burdenedwith debts and find it hard to attract deposits. Higher percentages of local branches of the cooperative across the country have more debts than their own assets, the survey showed.

As China's only non-profit governmental banks in rural areas, the Agricultural Development Bank of China is being operated on a very limited scope. It has not given scope to expected positive role in supporting agricultural development, said Fu.

For the lack of insurance operation in rural areas, farmers usually cannot return the loans when they come across with wretched weather conditions, he said.

The survey report suggested that the central government should encourage commercial banks to increase loans in rural areas by implementing the relevant financial supporting policies and laws. Meanwhile, the governments should further reform the rural credit unions and introduce a risk-avoiding banking mechanism in rural areas, the report said.

Source: Xinhua