Citibank, Standard Chartered and Bank of East Asia are all seeking to follow the lead of HSBC, which in August secured a license to set up a rural bank branch in the Chinese hinterland.

The government’s intention is that large financial institutions with rural branches will help redistribute the country’s wealth from the cities to the countryside.

The problem is that China already has one of the most extensive rural banking systems in the world and has problems with bad loans.

Agricultural Bank of China, one of China’s ‘big four’ banks, has closed many of its more remote branches in an attempt to become more economically viable.

There are also more than 32,000 rural credit co-operatives, which resemble micro-credit institutions in other parts of the world.

This year, however, rural incomes are rising — partly thanks to rising food price inflation and partly to the renewed political emphasis on the rural economy.

If farming incomes continue to rise, HSBC could even find opening a branch in the Chinese countryside has more benefits than originally thought. Our illustration shows HSBC’s China CEO Richard Yorke and volunteers from the bank demonstrating, perhaps, how to become sort of truly rural. In the picture they are planting trees in Paotaiwan Wetland Park in Shanghai for National Tree Planting Day.
Source: Financial Times