Two top banking officials promised yesterday to push rural financial reforms to provide more effective financing for the country's countryside.

Zhou Xiaochuan, governor of the People's Bank of China, the central bank, said management of the rural credit co-operatives will be improved and the shareholding reform of the rural banks will be accelerated.

"The property rights of the rural credit co-operatives will be further clarified and their corporate governance improved ... to make them community financial institutions to (better) serve farmers," he said when addressing the 26th meeting of the Standing Committee of the 10th National People's Congress.

Zhou also urged that the establishment of the rural postal banks be accelerated to make postal deposits play a larger role in supporting rural development.

He said agricultural insurance and farm produce futures should be developed to reduce the risks of farmers. Other rural financial innovations, including establishment of micro-credit organizations and legal private lending, should be encouraged, he added.

Since Chinese farmers still resort to small-scale individual farming, many financial institutions have found it too costly to provide services for them, leaving many in need of development capital.

The newly concluded central rural work conference and last month's central economic work conference called for more financial support for the rural areas.

Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), admitted that problems abound with the existing rural financial institutions.

The small number of rural financial institutions, for example, cannot cover those farmers who need financing, Liu recently told the 2006 China Financial Forum in Beijing.

Their low operational efficiency and lack of competition have added to the financial predicament of the farmers.

Liu said the regulatory body has eased requirements for rural banks and other institutions willing to enter the rural areas to support local development.

"We have relaxed conditions for industrial and private capital to establish new institutions or purchase and merge existing ones," he said.

The CBRC released a new guideline last week that halves the registered capital requirement for rural co-operative banks to 10 million yuan (US$1.28 million).

The new rule also encourages investors to try more financial products in accordance with rural realities.

Liu said regulations would be strengthened in rural areas to reduce risks and ensure the healthy development of new financial establishments.

Tang Min, chief economist of the Asian Development Bank in China, said the new initiatives taken by the regulators are a "milestone."

"Ten years from now, when we look back, it may prove to be a significant breakthrough," he said.

Source: China Daily