A rural bank established by the Hongkong and Shanghai Banking
Corporation Limited (HSBC) opened for business on Thursday, marking
the first entry by an overseas bank into a rural area of China.
The HSBC rural bank in the Cengdu District of Suizhou City in
central China's Hubei Province offers deposit service for local
businesses and individuals, and helps businesses raise funds.
With a staff of 22 and an initial capital of 10 million yuan
(about 1.36 million U.S. dollars), the bank, a wholly-owned
subsidiary of HSBC, will also provide trade financing and
settlement services for export-oriented rural enterprises.
Peter Wong, Chairman of the Board of HSBC Rural Bank, said that
he expected the bank to reach a balance of income and expense
within the next three years. He said the bank attached importance
to "accumulating the experience of running a rural bank and
cultivating a rural financial pattern applicable across China."
Local government sources said that the HSBC rural operation
would be granted the same treatment as other local rural financial
institutions, including a three-year income tax holiday and lower
sales tax rates.
Analysts said this rural foothold would give its parent, HSBC,
extra leverage in the Chinese market as the country's rural-urban
deposit gap was closing rapidly.
The per capita banking deposit for Chinese urban residents was
89.8 yuan (about 12 U.S. dollars) in 1978, nearly 13 times as much
as that for farmers. By the end of 2005, the disparity had been
narrowed to 5.28 times, with the urban per capita deposit at 20,715
yuan and that for farmers at 3,301 yuan, according to the National
Development and Reform Commission (NDRC), the country's top
Overall, Chinese citizens had deposited an aggregate 17.5
trillion yuan with all financial institutions by the end of March,
central bank figures showed.
If all went smoothly, HSBC said, it would expand its services to
include agriculture-related loans to individual farmers later in
Enthusiasm for foreign-funded banks in rural China rose after
the banking authorities lifted restrictions in October. Villages
and townships were previously approved to try rural banks on a
pilot basis only in the provinces of Sichuan, Qinghai, Gansu, Jilin
and Hubei as well as Inner Mongolia Autonomous Region.
At the end of 2006, the China Banking Regulatory Commission
(CBRC) lowered the registered capital threshold to 3 million yuan
for banks at the county level and 1 million yuan for those at the
village and town levels.
Du Xiaoshan, deputy head of the Rural Development Institute of
the Chinese Academy of Social Sciences, maintained that the weak
presence of financial institutions and the inadequate, inefficient
services they offered in rural China would allow foreign banks to
do more business with less competition.
A report by the prestigious Tsinghua University showed that
China had at least 120 million farmers who needed loans, but only
60 percent were able to obtain financing. The situation was worse
for small rural enterprises, with only 50 percent able to get the
loans they needed.
Tucked away in northeast Hubei province, Suizhou now has 21
financial outlets, mainly rural credit cooperatives and postal
banks, servicing its 1.81 million rural residents, about 88.7
percent of its total population.
A Suizhou Rural Credit Union report predicted strong potential
for the local rural market. Through September, rural credit
cooperatives held only 33 percent of total outstanding loans of all
local urban and rural credit cooperatives but reaped more than 37
percent of total interest proceeds.
Chairman Vincent Cheng of HSBC maintained that the advantages of
his banks lay in its global network, expertise and experience from
running rural banks in Brazil, India, Indonesia, the Philippines
Official figures show that about 44 percent of Suizhou's 900,000
rural laborers have left farming and now work in the service and
The city's 32 companies specializing in agricultural exports
generated 61.84 million U.S. dollars in revenue in 2005, while
total agricultural output stood at 8.26 billion yuan.
China currently has 25 rural financial institutions: 13 village
banks, four lending firms and eight rural credit cooperatives.
(Xinhua News Agency December 14, 2007)