The Guangdong Rural Credit Cooperative Union, the largest union of its kind in China, was inaugurated on Tuesday, marking a major step in the reform of the sector in the southern province.

Part of the second wave of nationwide rural credit cooperative (RCC) reform, the Guangdong union is made up of 99 of the lower-level unions in the province and has registered capital of about 300 million yuan (US$36.14 million).

Its role is to manage, guide and coordinate the RCCs under its umbrella on behalf of the provincial government. It is expected to start operation next month.

The union has a target of deposits and loans of 517 billion yuan (US$62.29 billion) and 317 billion yuan (US$38.19 billion) respectively by the end of 2007, or 14 percent and 13 percent annual growth respectively.

It will also strive to bring all its members into the black, as well as cutting non-performing loans and boosting the capital adequacy ratio, in the hope of producing candidates that could become rural cooperative banks by 2007.

The provincial government will allocate 400 million yuan (US$48.19 million) each year till 2007 for the purpose of enlarging its share capital and reducing its financial risk, in addition to the financial support it will receive from the central authoritiessaid Song Hai, vice-governor of Guangdong Province.

These efforts are part of a programme started in 2003 and aimed at restructuring the mostly unprofitable RCCs, which are the major source of funds in the nation's vast rural areas.

Key parts of the reform include clarifying ownership structure and improving corporate governance, as well as shifting responsibility for the RCCs from the central to provincial authorities.

The RCCs in Guangdong have the largest business network amongst all the financial institutions in the province, with 7,022 outlets excluding those in Shenzhen, a special economic zone in Guangdong, as of the end of June. Together, they employ 57,000 people.

Outstanding deposits of RCC's in Guangdong, excluding those in Shenzhen, amounted to 378.05 billion yuan (US$45.55 billion) at the end of June, accounting for 14.1 percent of the total deposits of all financial institutions in the province and 12.3 percent of the total of all RCCs in the country.

(China Daily July 14, 2005)