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China's banking regulator has announced a new policy regarding the restructuring of high-risk rural credit cooperatives. The move is to better manage those credit cooperatives, to serve the development of agriculture and rural areas.
The new announcement made by China's Banking Regulatory Commission, allows commercial banks to fully acquire high-risk rural credit cooperatives. But individual companies can buy in no more than 20 percent of the total shares in those credit cooperatives.
There will be more than 200 rural credit cooperatives affected by merger and acquisitions, accounting for about 9 percent of the entire rural credit system. These institutions are mainly insolvent, and their rates of non-performing loans are over 20 percent higher than similar financial institutions.
Jiang Liming, Official of China's Banking Regulatory Commission said "Private capital is given more space to perform in the financial industry now. For example, companies can hold 20 percent of the rural credit cooperatives from the previous 10 percent."
Rural credit cooperatives are the main force in supporting the development of agriculture. Currently, it's responsible for more than 90 percent of all agriculture loans. It's expected that these credit cooperatives will better honor their mission with the implementation of the new policy.