Trouble in store
1 June 2002
Postal savings accounts are increasingly popular, but the prospect of post offices being able to offer loans to rural enterprises threatens to undermine one of the few solvent branches of China's financial system.
By now, China watchers are well aware of the bad debt problems plaguing the country's large stateowned banks, but other areas of the financial system are facing troubles of their own. One especially vulnerable but poorly understood sector is China's network of rural credit co-operatives (RCCs), which have traditionally supplied credit to farmers and township enterprises. Chinese financial officials, who are normally very cautious about disclosing information on the level of bad loans, admitted several years ago that the RCC sector as a whole had negative net worth, and the small size of individual RCCs left them vulnerable to depositor panics.