Note: The data are provided for informational purposes only and in some cases, the information may be incomplete, not fully accurate or out of date. For more information on how data are compiled, see "A Note About Sources." The date of the last update for each country is marked in the section "Country Indicators." We welcome updates and comments. Click here to write to us.
China
Country Indicators
Information Last Updated
February 2005
Population (Millions)
1,304 (exclude H.K.) [2005]
Population Density (per sq km)
140 [2005]
GNI per capita (US$)
1740 [2005]
GNI per capita (PPP US$)
6600 [2005]
Total Unemployment (% of labor force)
4 [2002]
Employment in Agriculture (% of total employment)
44 [2002]
Gross domestic saving (% of GDP)
41 [2004]
% Population under $2/day (PPP)
18 [2001]
Depth of Financial Sector (M2/GDP)
123 [2005]
Exchange rate
1 USD : 8.275853 Renminbi (RMB), as of 25 February 2004
Ownership structure of banks (and financial institutions if available)
Banking entities can be state-owned, joint-stock commercial banks, cooperatives, cooperative banks. Foreign banks can open business branches and representative offices, and foreign investors can invest in joint-stock commercial banks and city commercial banks. Financial institutions other than banks include trust and investment corporations, finance companies, financial leasing companies, and the China Postal Savings and Remittances Bureau.
Formal and Semi-Formal Sources of Microfinance
Rural credit cooperatives (RCCs). Some state-owned banks also offer microfinance.
International and domestic NGOs, local government initiatives.
Microcredit refers to credit extended without collateral or guarantee to rural households to finance agricultural production, purchase of small farming machinery, services related to agricultural production, and housing, medical services, education, and consumption.
Ongoing microfinance policy development status
With new leadership installed in the central government in early 2003, a renewed interest in financial reform, especially for rural areas, has resulted in reform of the RCCs and their regulatory environment. These reforms are currently in the pilot stage.
General Participation in the Financial Services Market
No. of institutions
Lending portfolio
Deposits
Target Market
Banks
Commercial Banks
State-owned Banks: 7 (as of 2003)
Other Commercial Banks: 127 domestic banks, including: 11 joint-stock commercial banks, 112 city commercial banks, three rural commercial banks and a rural cooperative bank (as of 2003)
192 business branches of foreign banks, 209 representative offices of foreign banks. (as of 2003)
State-owned banks: US $1,048.19 billion (8,700 billion RMB) (as of 2001)
State-owned Banks: Generally lends to large corporations and state-owned enterprises; also provides infrastructure lending and in some cases administers the government’s poverty alleviation lending.
Other Commercial Banks: Generally lends to large corporations, medium and small sized corporations. Focus on retail financial services: current account, savings deposits and customers loans. Nationwide shareholding banks currently focus on coastal areas. Regional and city banks restricted to respective jurisdictions.
Non-bank Financial Institutions
Financing Companies
74 (as of 2003)
Leasing Companies
12 (as of 2003)
Generally lends to large and media corporations in both urban and rural areas. They include national commercial banks, urban cooperative commercial banks and rural cooperative and commercial banks.
Commercial banks are legal enterprises established that take in deposits from the general public, grant loans, handle settlements, etc. (See 1995 Commercial Banking Law, Art. 2)
The People’s Bank of China (the Central Bank); China Banking Regulatory Commission (CBRC)
Taking deposits from the general public, granting loans and handling settlements, etc. (See 1995 Commercial Banking Law, Art. 3)
Rural Credit Cooperatives (RCCs) are financial institutions began originally as part of the Chinese government’s collectivization efforts in the 1950s. Today, RCCs serve mainly in rural areas to finance farming and agricultural production activities.
Members of RCCs hold shares in the RCCs. Individual RCCs are located at the township level and connect to each other via a county level RCC union. Some provinces and administrative cities have created a provincial-level RCC union or association. These help provide some financing and supervisory functions. (See 1997 Regulations for the Management of County Level Rural Credit Cooperatives Union, Chapter 1)
China Banking Regulatory Commission (CBRC) Department of Cooperative Finance supervises RCCs. Provincial-level RCC unions also manage and regulate RCCs in their jurisdictions if authorized by Provincial-level governments.
Member-based organization that grants loans and accepts deposits in rural areas
The People’s Bank of China; Industrial & Commercial Administration Authority (See 1995 Commercial Banking Law, Art. 16)
The 4 state commercial banks, as well as the 3 policy banks, remain wholly state-owned (state banks hereafter). But other commercial banks have all adopted a shareholding ownership structure, though the state still has a controlling stake in most of them.
The provincial-level RCC union and RCCS must first obtain “financial business operation permits” from Banking Supervision & Management Bureaus and then register in Industrial & Commercial Administration Authority to obtain business license. (See 2003 Rules for RCCs at Provincial level , Art 13)
RCCs must have a minimum of 500 members. (See Regulations for the Management of Rural Credit Cooperatives (1997), Art. 9.) Purchases of more than 10% of share capital must be approved by the PBC. Rural Commercial Banks can own a certain percentage of shares in Rural Credit Cooperatives at provincial, municipal, national, and autonomous regional levels under the voluntary premises and obtain certain related services from them. (See 2003 Rules for RCCs at Provincial level )
For Provincial Level RCCs: Investment percentage of each member cooperative can not be more than 10% of total numbers of shares of RCCs, and investment percentage of allied member cooperatives can not be more than 30% of total numbers of shares of RCCs at provincial level. Stock certificates issued by RCCs at provincial level can be transferred. (See 2003 Rules for RCCs at Provincial level )
Licensing Requirements and Standards
Standards for ownership officers
Feasibility study/business plan
Audit of Proposed Founders, Owners, Officers
Prohibited sources of funds
Banks
Commercial Banks
Senior managers must meet qualification standards; shareholders with greater than 10% of capital should be subject to prior approval by the Central Bank. (See 1995 Commercial Banking Law, Art. 28)
The employees may not simultaneously hold a position in another economic organization. (See 1995 Commercial Banking Law, Art. 52)
Applicants must provide financial and accounting reports from the preceding two years
Non-bank Financial Institutions
Rural Credit Cooperatives
Senior managers must meet qualification standards; shareholders with greater than 10% of capital must be credit-worthy; the employees of RCCs must be members of RCCs. (See 1997 Regulations of RCCs, Art. 3)
The ratio of outstanding loans to deposits must not exceed 75%. The ratio of current assets to current liabilities minimum 25%. (See 1995 Commercial Banking Law, Art. 39)
Outstanding loans to deposit ratio must not exceed 80%; ratio of current assets to current liabilities minimum 25%. (See 1997 Regulations of RCCs, Art. 28)
Risk Management Guidelines
Guidelines & restrictions on financial services
Guidelines & restrictions on operational rules
Guidelines & restrictions on interest rates
Concentration of risk
Connected/insider business
Banks
Commercial Banks
Permitted: Public deposit-taking, loans, domestic and foreign settlements, bonds, interbank lending, foreign exchange, guarantees, insurance (See 1995 Commercial Banking Law, Art. 3)
Prohibited: May not engage in trust investment or share business, or invest in NBFIs. (See 1995 Commercial Banking Law, Art. 43)
Establishment of branches must be approved by the People’s Bank of China. The sum total of operational funds allocated to branches may not exceed 60% of the total capital of the head office. (See 1995 Commercial Banking Law, Art. 19)
Interest rates on deposits must be determined in accordance with the upper and lower limit interest rate specified by the Central Bank. (See 1995 Commercial Banking Law, Art. 31)
At present, the present benchmark one-year bank deposit rate is set at 2.25% and the one-year lending interest rate is 5.58%. (as of 2004)
Max exposure to a single borrower = 10% of the bank’s own capital (See 1995 Commercial Banking Law, Art. 39)
Over 10% share in a commercial bank by any organization or individual: Approval required
Deposit rates are set by the government; lending interest rates are also fixed but RCCs do have a range of flexibility surrounding the set rate. At present, the present benchmark one-year bank deposit rate is set at 2.25% and the one-year lending interest rate is 5.58%. The maximum upper limit of RCCs’ lending interest rate will be 2.3 times the benchmark interest rate. Their degree for rate reduction is 0.9 times. (as of 2004)
Loans to members must be at least 50% of lending portfolio. Max exposure to a single borrower = 30% of bank’s assets.
Connected parties (management, owners, companies the bank has invested in) must be granted loans on the same terms as other parties. Managers and members of the board can not also hold senior positions in the Communist Party or in large local businesses.
Reporting and Supervision
Supervision Method
Disclosure and reporting requirements
Depositor protection mechanisms (e.g., deposit insurance or lender of last resort)
Banks
Commercial Banks
The People’s Bank of China has the right at any time to carry out inspection, and at that time must produce identification papers. Commercial banks should conduct routine internal inspection and monitoring at branches. (See 1995 Commercial Banking Law, Art. 62, 60)
Within three months after the end of every fiscal year, commercial banks shall publish their business results and audit reports. (See 1995 Commercial Banking Law, Art. 56)
There are only several general regulations, no exact protection mechanisms. (See 1995 Commercial Banking Law, Art. 29-33)
Non-bank Financial Institutions
Rural Credit Cooperatives
On-site inspections from the CBRC can occur at any time. Each RCCs’ internal Board of Supervisors should also play a monitoring role.
Annual audited financial statements; county and provincial level RCC associations must report monthly on credit quotas.
Deposit insurance is implicitly provided by the PBC; no formal deposit protection mechanisms exist.
Tax Treatment
Taxes on Income
Taxes on Transactions
Other
General Applicability
General Applicability
Corporate income tax rate (2005): 33% (standard), 24% (coastal cities), 15% (special economic development zone); Individual income tax rate (2005): progressive, 5%-45%; Capital gains are taxed as income. [All information in this section from Deloitte 2005.]
Credit Rating and Reporting Requirements: Formatting requirements (e.g., CGAP, GAAP, or other international standards)
Security interests: Forms accepted
Security interests: Recording
General Applicability
General Applicability
Credit guarantees (very popular in urban SME lending); mortgages on land use rights and real property; means of transportation, equipment and other movables; cashable savings instruments; and pledges on transferable stocks, patents, and trademarks. The most commonly used collateral is real estate assets, and some collateral such as equipment is often eschewed by banks. Collateral practices are generally incompatible with the availability of collateral for rural households, who most often have property rights to the house but not the land it occupies.
Collateral is registered at the government agency administering each type of property in each local area; there is no central collateral registry.
MFI-specific
MFI-specific
Internal credit rating system exists for RCCs; each household is rated and provided with a certificate outlining their available line of credit at the local RCC.
