A Study on the Current State and Improvement of Agriculture Development Bank of China
Authors:   Asia-Europe Perspective Association, Xu Song-Jie , Park Song-Choon 
Published: June 2018

The worldwide trend of globalization since 1990 has accelerated Chinese policies for reforms and opening, which started in the 1970s, and resulted in the rapid growth of the financial industry in China. The development of financial policies in China has brought changes to policy related banks, restructuring such banks that supply political subsidies for national economic development. However, rural finance failed to adjust itself to the restructuring. Specifically, despite demand for large amounts of funds in various areas including farmhouses, local companies, and private companies in rural areas, policy related banks are unable to meet the demand and this has become a problem in the utilization of policy based loans.
Currently in China, financial institutions are being monopolized and, as a result, financial services are being unified. In this situation, the number of financial institutions supporting urban areas is small, and farmhouses have to rely on ordinary commercial banks for loans. In addition, institutional financial agencies such as Chinese Agriculture Development Bank are applying strict criteria and requirements for loans to farmhouses in order to reduce risk, and this makes it hard for agricultural companies to get loans from institutional financial agencies. As a consequence, policy related banks in China cannot perform their functions of financial service adequately, and even the development of ordinary commercial banks is hampered heavily by the government’s regulations. These problems have been evidenced by various studies.
In order to overcome shortcomings of these studies and approach more detailed problems, this study purposed to examine the current state of Chinese Agriculture Development Bank, one of policy related banks in China, and to identify its problems and suggest solutions.
Chinese Agriculture Development Bank was founded as a part of rural financial reform in order to take over policy related loans from Chinese Agricultural Bank and to separate agricultural loans from commercial loans. Agriculture Development Bank does not deal directly with individual farmhouses, but its main missions are policy-related finance, the allocation of government’s funds, and the distribution of funds for supporting the agricultural industry. At present, the bank is in charge of policy related loans related to the reserve of important agricultural products including provisions, cotton and vegetable oil for the government, the purchase of crops, agricultural development, etc. In addition, it operates and manages loans from the government’s funds for supporting agriculture, and promotes the enhanced status of farmers in national economy and the growth of rural economy. What should be noted, however, is the fact that economic actors in rural areas use non institutional financial agencies more than institutional ones. This proves that the role of Agriculture Development Bank as a policy related bank is not significant yet. The reason for the ineffective operation of Agriculture Development Bank can be found in the domestic situation of China, namely, urban industrialization that induces the outflow of rural population and the concentration of funds into cities. In order to solve these problems, the works of Chinese Agriculture Development Bank is being adjusted in 2009 in a way of promoting the rapid growth of Chinese agriculture and rural areas. According to the announcement on February 6, 2009, the major duties of Chinese Agriculture Development Bank are classified into credit loan, financing, settlement, and international settlement.
This study analyzed the works of Chinese Agriculture Development Bank using the SWOT method. In the results, we found a number of problems that may have a considerable impact on the development of Agriculture Development Bank such as imperfect laws on farmlands, rural communities’ low credit, and the expansion of farming as a side business.