Regulator Tells Small Rural Banks to Know Their Place

China’s banking regulator has told village banks to focus on their local areas and lending to farmers and small companies, as part of the national “rural revitalization” strategy and efforts to prevent financial risk.

The China Banking and Insurance Regulatory Commission (CBIRC) published an order (link in Chinese) on Thursday prohibiting village banks from funding businesses or individuals outside the regions they are registered in. The prohibition extends to lending and discounting commercial paper and bankers’ acceptances, both of which are a form of promise of future payment and a common type of debt instrument.