One of the best Chinese analysts going around is Westpac's Phat Dragon. In a recent note he (she?) had this to say:
"A CBRC pilot scheme allowing farmers to pledge farm land as loan collateral has reportedly been conspicuously successful. The innovation, introduced alongside a number of incentives for banks and other financial institutions to expand rural services, has apparently resulted in a substantial take-up by farmers. Allowing land to serve as collateral brings the banks on side and empowers asset poor rural residents. Phat Dragon wonders how they will go raising regular cash to repay interest: presumably many will drops their hoes, leave the land to the bank and migrate to the ever growing cities. That said, a service economy could sprout in the countryside itself, generating new agglomerations and reducing the strain on the coastal meccas. Right now the incentive to borrow is heightened by the attractive subsidies presently available for purchasing small engined cars and household appliances. Rural consumption per capita is about half of the urban level, while in absolute terms rural spending is 37% of the national total. In 2009, for every 100 urban households there were 96 refrigerators whereas there were just 37 per 100 rural households. The rural areas have been starved of financial services and the durable goods that become more attainable with credit access. It is time to mobilise the 700 million or so who populate the hinterlands."
