China faces ‘big’ debt risks in drive to narrow urban-rural gap, Beijing forum told

Weak agricultural sector, residents’ poor financial awareness and lack of collateral options pose ‘big uncertainty’ for rural revival drive

Farmers find threshold too high, while finance bodies see ‘too much risk’, agriculture ministry official tells Tsinghua PBCSF forum in Beijing

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Zhou Mingshan addresses the Tsinghua PBCSF Global Finance Forum. Photo: Handout

Published: 9:00pm, 21 May 2023Updated: 9:36am, 23 May 2023

China must guard against debt risk in rural areas as it pushes to revitalise the countryside and narrow the urban-rural gap, Chinese officials and academics have warned.

Addressing the Tsinghua PBCSF Global Finance Forum, they said China’s campaign to push rural funding and infrastructure could give rise to big financial risks – given the inefficient agricultural sector, lack of loan collateral options, and rural residents’ preference to work in cities.

“There is quite big uncertainty [in the rural revival drive] from the perspective of investment and financing,” Zhou Mingshan, a finance professor and deputy president of the Zhongnan University of Economics and Law, told the forum in Beijing on Saturday.

A weak agricultural sector made investment risky, while rural residents – who are mostly low-income – were not good at using financial tools, Zhou noted.

One problem that has emerged during the development of rural financing is that farmers think the threshold is too high, while financial institutions find there is too much risk

Wang Yan

The biggest gap in rural investment related to infrastructure, which often featured high costs but low benefits, he added.

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