context: This laundry-list of rural fiscal and financial policy initiatives from MoF shows how the agency plans to contribute to 2020 poverty alleviation and 2022 rural revitalisation goals. Though we have tracked most of the policy moves mentioned here individually, MoF clearly outlines their relationship here. We expect this policy agenda will intersect with the recently mooted Rural Revitalisation Law and Rural Collective Economic Organisation Law.

Ministry of Finance (MoF) has made progress on rural financial reform and development work, says a post on the agency’s website which outlines recent progress and planned next steps.

Near term policy goals include

  • consolidating and enhancing impacts of the six broad policy areas detailed below
  • further increasing financial support to agriculture and rural development with the aim of attracting private capital participation
  • speeding up preparation of the National Rural Credit Guarantee Fund; improving other credit guarantee institutions
  • expanding crop insurance including both price and income insurance pilots
  • optimising support for inclusive finance; giving full play to related fiscal funds

MoF has focused on improving the policy support system and increasing financial support, promoting sound development of rural finance, delivering stable and balanced growth, promoting employment and facilitating structural adjustment via the following six broad policy initiatives, says the piece

  • introduction of tax incentives to encourage financial institutions to support rural development
    • VAT exemption for financial institutions providing financial services to farmers, rural SMEs and household enterprises, including bonds and re-guarantees of the above services
      • from 1 September 2018 to end 2020, all rural SMEs are eligible
      • upper limit for loan interest income receiving VAT exemption raised to 5 million
    • introduction of tax incentives for small rural for-profit enterprises, reducing taxable income by 50 percent
      • upper limit of annual taxable income that can enjoy this benefit has been raised to 1 million
    • VAT for agricultural goods has been reduced from 13 to 10 percent
    • exemptions from local education and water conservancy construction funds expanded to include businesses with monthly taxable sales or turnover of no more than 100,000
  • pushing financial institutions to strengthen support to the rural economy
    • increasing policy-based finance
      • Agricultural Development Bank loan balance was 4.95 tn, an increase of over 20 percent y-o-y
      • cotton, grain and oil purchasing, development projects and industrial investments are key focuses
    • expanding ‘three rural’ financial services
      • Agricultural Bank of China takes the lead
    • developing a performance evaluation system for institutions providing rural financial services
    • building a ‘green channel’ for write-off of bad loans to small and micro enterprises, reducing risk and speeding up loan-making process
  • building a rural credit guarantee system to reduce financing costs
    • setting up National Agricultural Credit Guarantee Union Co.
    • building province-level rural credit guarantee companies
      • as of April 2018, 33 province-level regions covered
      • national rural credit guarantee coverage totaled over 60 bn including 43.5 bn in central funds
      • credit guarantees covering 91,700 projects
    • setting up a National Credit Guarantee Fund
  • increasing support to agricultural insurance
    • encouraging companies to expand coverage, raise standards, add products
      • supporting new product development, underwriting, billing, evaluation of claims; supporting assessment system development at insurance management agencies
      • number of insurance companies grew from six to 30, operating 400,000 ag insurance service stations nationwide
    • supporting improved coverage level
      • raising insurance premium subsidies in key grain producing counties and for rice, wheat and corn to 45–47.5 percent
      • piloting full coverage for all rice, wheat and corn farms in 13 key grain producing counties
      • raising premium subsidies and coverage level in central and western provinces
      • expanding coverage to 15 categories including crops, livestock and forest products
      • raising coverage to roughly 70 percent of all farming area in rice, wheat and corn
    • 2017 allocation of 17.9 bn in premium subsidies led to 47.7 bn in premiums paid and 2.8 trillion in total coverage for 213 million farms
  • using private–public partnerships (PPPs) to promote rural development
    • adjusting structure of public funding to better attract private participation
    • expanding PPPs into the rural and agricultural sector, focused on
      • ag green development
      • high standard farmland
      • modern ag industry parks
      • agro-pastoral projects
      • ag product logistics and trading platforms
      • internet+ag
    • in May 2018 there were 53 ag projects in the national PPP register, with total investment of 52.5 bn
      • 20 of these projects have landed, with total investment of 25.9 bn
  • set up a special funds for promoting rural revitalisation through inclusive finance
    • providing interest subsidies to financial institutions that service small and micro enterprises in rural western China
    • expanded access to the inclusive finance fund to include self-employed rural entrepreneurs in March 2018
      • greatly reduces threshold for access to support