After more than 20 years of reform on the rural financial system, China has now established a system which takes the rural credit cooperative as the heart and the formal financial institutions as the backbone. And again, the commercial policy-oriented as well as the cooperative financial institutions have also been included into this system.

The six major financial institutions of China rural banks are as follows: agriculture bank (commercial bank); agricultural development bank (policy-oriented bank); rural credit cooperatives, rural commercial banks and rural cooperative banks (rural cooperative financial institutions); and post saving institutions. Since the financial system reform the agriculture bank, which acts as one of the three drivers (agriculture bank, agricultural development bank and rural credit cooperatives) for rural financial course, has retreated from the rural financial market following the state-owned commercial bank. The business scope of agricultural development bank also shrank largely because of policy-based losses.

As a formal financial institution of China's rural areas, the rural credit cooperative not only owns the most branches (over 30,000) but also is the only one who has direct business with rural families. And moreover, it also plays the leading role in offering financial services for the countryside and agricultural economy. However, the rural credit cooperative has failed to establish a complete rural financial system providing differentiated financial services as a result of enormous non-performing loans and losses.

Due to imbalanced development in the regional economy and the co-existence of different economic structures and ownership patterns, there are great differentials inside rural credit cooperatives which determine that its future development is destined to diversify. So it is historically inevitable that some rural credit cooperatives might develop toward commercial banks.

Presently, there are many informal financial institutions in the China rural financial market such as pawnshops, ROSCA (Rotating Savings and Credit Association), private loans and federations, the existence of which reflects the imbalance of rural financial institutions and the financial dualism.

By the end of 2005 there have been provincial-level cooperatives among 25 provinces (districts, cities) across China and such institutes as Beijing rural commercial bank, Shanghai rural commercial bank and Tianjin rural cooperative bank were set up in succession. 60 rural cooperative banks and 12 rural commercial banks have been established in China and 9 rural cooperative bank institutions are prepared for construction. 519 institutions with the city as the legal person have been formed. Moreover, the capital adequacy ratio of the majority of credit cooperatives is better than that of commercial banks.

Being the result of in-depth reform on rural credit cooperatives with better asset superiority in developed regions, China rural commercial banks have developed well. At present, the non-performing loan ratio and capital adequacy ratio can basically meet the supervisory standard.

Unlike other commercial banks, the emerging rural commercial bank faced completely different conditions and foundations for development at the very beginning, which required it to improve the core competitiveness for risk prevention so as to become powerful in the domestic financial market.

The private and foreign capitals should be introduced into the rural financial market in order to support the rural economy and deepening the rural financial reform is the key for the next stage.

After the release of policies on China's rural financial reform the opportunities in rural areas are much greater. With the improvement of the rural economy the risk will be decreased accordingly and the investment value will emerge along with the implementation of the policies. Meanwhile as the reform & opening are speeding up, foreign financial institutes and investors are paying more attention to rural finance. Consequently China's rural commercial bank market will see a huge development potential.