What are rural credit cooperatives?

Although there are many commercial banks in China, they don't operate in areas below county level due to the costs of operation, high financial risk and low return. The rural sector is now served by a state bank (Agricultural Bank of China), a policy bank (Agricultural Development Bank of China) and thousands of rural credit co-operatives (RCCs).

A rural credit co-operative is the only legal financial institution, other than banks, serving rural enterprises and individuals. By the end of last year, there were about 40,000 RCCs across China.

The sector remains largely insolvent because loans are not extended on commercial terms, and local governments often exert pressure on the cooperatives to lend without a proper credit evaluation of the project.