Rural financial institutions' profit up

Increased to reach eight-year high in 2014

China's rural financial institutions' full-year profit increased to an eight-year high in 2014, official data showed on Wednesday, at a time when the country is encouraging more private capital toward rural banks.

China's rural commercial banks achieved an average return on assets of 1.38 percent and an average return on equity of 17.23 percent in 2014, both being the highest levels reached since 2007, data from the People's Bank of China (PBC) showed Wednesday.

The rural credit cooperatives (RCC), which faced operational difficulties in the past few years, also reported a surge on its average return on assets from 0.85 percent in 2013 to 0.95 percent in 2014, much higher than the reading of 0.36 percent in 2010, the data showed.

The rising profit was mostly attributed to a rapid economic growth and financial innovation in agriculture-related sectors following the authorities' acceleration of ramped-up measures including land system reform in China's rural areas, Guo Tianyong, head of the China Banking Research Center at the Central University of Finance and Economics, told the Global Times on Wednesday.

"Benefit from the reforms and popularity of the Internet, more innovative financial products including Internet financial services are expected to be seen in China's rural areas, which could bring higher profit and attract attention from more private capital," Guo said.

According to Xinhua News Agency, China Banking Regulatory Commission in December encouraged institutions to make more private investment to RCCs by reducing requirements and announced it would encourage private investors to establish rural commercial banks.

China now has a comprehensive financial network in rural areas, including 1,596 RCCs, 665 rural commercial banks, 89 rural cooperative banks and 1,153 village or town-level banks, data from the PBC showed on Wednesday.

The PBC said Wednesday in a statement that the authority would continue to develop rural banking networks and expand it to all administrative villages in three to five years.

Even though the average profit for rural credit is increasing, the government still needs to support the expansion with more preferential policies because areas that have no access to financial services are mostly in remote provinces, where it is not easy to make profits, Tian Yun, chief editor of the China Macroeconomic Information Network, told the Global Times on Wednesday.

Xinhua reported that China cut the reserve requirement ratio (RRR) for county-level rural commercial banks by 2 percentage points and that of RCCs by 0.5 percentage points in April 2014.

Preferential policies for rural financial institutions would indirectly benefit the rural economy, Tian said, adding "water conservancy as well as other infrastructure construction financed by loans from those institutions would help the expansion in demand amid a slowing economy."