The China Bank Regulatory Commision ( CBRC) recently withdrew the authorization of approval of the openning of Village and Township Banks (VTB). It imples that the development of VTB network will be slowing down, but I think it is smart and timely to do so.
This issues shall be tracked back to 2006, when CBRC issued a policy aiming to foster the rural finance by giving authorizations to local CBRC to approve VTBs. Together with authorization, there are several favourable policies, for instance, the local banks can open VTBs in other regions, and if a VTB is established in poverty driven areas (west areas), a chain VTB would be allowed to open in the relatively rich areas (east areas).
Because financial service in China has strict control by Gov, many banks, especially small banks were active to apply and open VTBs. With this motivation, many VTBs are newly established, and many of them were in poor areas.
If we only look at the numbers, we may be happy with the figures. The question, however, is how well and how effective these VTBs are working? Do they really meet the needs of farmers, and really devote to provide service to poor farmers?
Soem local banks open VTBs in west areas, but their main business is in the "Chain" of it which locates in rich areas. Some banks established VTBs just because they want to develop their business in other regions. The natinal wide banks, e.g. four big banks only have very limited number of VTBs. It makes sense from one hand, as their business was mainly in urban areas, and their business modaliy does not well fit the rural culture. From the other hand however, VTBs can not benefit from the relatively advanced management which impede its developement as a whole.
The withdraw of the authorization reflects that the authorities are more concerned on the true value of VTBs bringing to poor rural areas. I personally think it is a good approach. In China many things are developing so fast, and the volumn increases in a surpring rate. It sometimes is at the cost of quality though. So I personally t hink China shall slow down, but more focus on green and sustainable development.