Chinese farmers will soon be allowed to use their management rights over contracted land and their homes as collateral for bank loans. The trial programs, announced by the State Council on Monday [24 August 2015], are an attempt to revitalize rural land assets, increase the investment in long-term and large-scale agricultural projects, and raise farmers’ income. China’s central bank, the People’s Bank of China, and the central leading group office of rural work will improve rural finance and carry out pilot projects to allow farmers to raise mortgages…Full Article: Xinhua Aug 2015

Key Point

  • Local governments and organizations will reportedly push for lower interest rates, extended maturity for loans, and favorable credit ceilings for farmers.

ChinaAg Comments

  • In early March 2015, the mainland’s China Banking Regulatory Commission (CBRC) urged domestic banks to improve rural lending services in order to modernize the country’s agriculture sector.
  • In December 2014, the Chinese government announced that it would extend tax breaks on interest revenues banks generate from loaning money to farmers (i.e. revenues are exempt from sales tax and corporate income tax, and tax will only be paid on 90% of interest revenues). In addition, the PRC government announced that the ceiling amount for small loans to farmers will be raised from CNY 50,000 (US$8,130) to CNY 100,000 (US$16,275). Lastly, the 3% discount on sales tax (county level payable) from insurance was extended through the end of 2016.
  • In April and June 2014, China cut its reserve requirement ratio (RRR) for banks that lend to agricultural enterprises by 2% and 0.5%, respectively.
  • In March 2014, China’s central bank announced the establishment of a credit system for serving small and micro-sized companies and farming households. The system, which will aid farmers to receive small loans, was to be piloted in 31 cities and 32 counties, including Gaoling County, Shaanxi Province.
  • In February 2014, China’s central bank announced they will institute customized financial services in order to modernize farming practices. For example, farmers who cultivate fruit or other crops will long growth cycles will be eligible to receive loans that have a maturity length of up to 10 years.

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