In recent years, the market share of RCCs been eroded by an even more obscure competitor, the state-run postal savings system. China’s post office maintains a network of more than 31,000 deposit-collection points, with roughly two-thirds in rural areas. Until now, the postal savings system been largely passive: post offices in rural China accept deposits and place them with the People’s Bank of China, rather than relending them to local enterprises.
The role of postal savings in the Chinese economy is beginning to expand, however. According to the 2001 edition of Almanac of China’s Finance and Banking, a People’s Bank statistical publication, the market share of the postal savings system at end-2000 had risen to 7.12 per cent of total deposits from 6.51 per cent a year earlier. The almanac’s compilers note that rural Chinese are increasingly shifting funds into postal accounts, and give two explanations for the trend.
One factor, according to the central bank, is ‘the gradual withdrawal of the state-owned commercial banks from rural areas’. China’s four largest banks are under strong regulatory pressure to improve their profitability and curtail the growth of bad loans. In an effort to cut overheads, the ‘big four’ have begun closing thousands of rural branches, where there are fewer opportunities to make large loans and deposits per employee are lower than in the cities.
The second incentive for opening postal accounts is what the central bank euphemistically calls ‘the process of systemic reform of rural credit co-operatives’. In fact, deposit growth at the RCCs has continued in recent years, although postal deposits are growing even more rapidly (see chart). The main factor deterring even faster growth in RCC deposits seems to be increasing concern about the solvency of the RCCs, which do not enjoy the nationwide scope of either the big four banks or the postal savings network.