Deputy PBC (People's Bank of China) governor Wu Xiaoling said Thursday in Beijing since the overall function of China's existing rural financial system no longer serves the need of the strategic adjustment of rural economy the government would make function orientation and adjustment on policy-based finance, commercial finance and rural credit cooperatives in order to innovate upon rural financial system and raise the level of rural financial service in a comprehensive way.

According to Wu Xiaoling in some period to come reform on China's rural financial system would concentrate on the following aspects:

Reinforce the agriculture-supporting role of policy-based finance. Establish financial compensation mechanism of policy-based finance. Through compensatory financial expenditure non-governmental funds would be directed to agriculture and the rural areas. As the marketization reform of grain-cotton circulation system is running deep the conditions for the function adjustment of Agricultural Development Banks of China have matured. The central bank has planned to appropriately expand the bank's business scope and allow it to open businesses such as comprehensive agricultural exploitation and poverty-relief loans.

Strengthen the commercial finance support of agriculture. The central bank is now conducting research to enact laws and regulations on community re-investment. The consideration for the system is to require financial institutions within a county to fulfill their agriculture-supporting service function in proportion to their deposit sources.

Continue to straighten out the re-deposit mechanism in postal savings and direct some postal savings funds back to the rural areas. As approved by the State Council, for deposits re-deposited to the central bank by the postal savings before August 1, 2003, the policy to have them transferred out in proportion in five years will be applied. As for now the central bank is mulling relevant policies and measures to direct postal savings back to agriculture and the rural areas.

Continue to improve small-sum loaning mechanism. As approved by the State Council three key poverty-relief counties would be selected from each of eleven provinces and cities such as Liaoning as pilot program for rural credit cooperatives to implement poverty-relief interest-discount household loans.

By People's Daily Online