China’s rural co-operative financial institutions have largely shown remarkable improvements in relation to how they are managed, their ability to withstand risk and the standards of their service.

In particular, there has been tremendous progress made in the creation of a group of rural commercial banks based on the principle of a shareholding system. A new report says that rural commercial banks have shown such healthy development that they have obtained the necessary credentials to transform into modern financial enterprises.

The report, China Rural Commercial Bank Report – 2007, finds that there has been a significant reduction in the outstanding non-performing loans (NPL) of the all rural commercial banks. By the end of September 2007, for instance, the outstanding NPL was RMB13.51 billion, a figure that represents an RMB 1.92 billion decrease compared with the end of the previous year. Also, the NPL rate was 4.2%, 1.7 percentages points lower than that at the end of last year.

Analysts believe that in 2007, China’s rural commercial banks were keen to follow the successful listing of some urban commercial banks, including Bank of Beijing. In November 2007, Jiangsu Offices of China Banking Regulatory Commission confirmed that four rural commercial banks, namely Zhangjiagang Rural Commercial Bank, Wujiang Rural Commercial Bank, Jiangyin Rural Commercial Bank and Changshu Rural Commercial Bank, in Jiangsu province have received the training for their initial public offering or IPO. Apart from these banks, other rural commercial banks in Xizhou, Wujin, Dongwu and other places in the province have begun to make primary preparations for listing.

There have been reports in December 2007 that Zhangjiagang Rural Commercial Bank has got approval for its initial public offering from China’s top banking regulator, indicating that the bank is expected to be the first rural commercial bank in China to go public. However, the official IPO still requires the approval from China Securities Regulatory Commission.