Are China's Financial Reforms Leaving the Poor Behind - Harvard ...

of regions than in the poorest quartile. The rural financial institutions in Zhejiang areparticularly large, and ABC branches are considerably bigger than RCCs.Most rural lending is to firms, not farmers. Seventy-four percent of outstandingloans went to firms in 1994; by 1997 the share had fallen slightly to 71 percent (Table 1).However, in poorest quartile where presumably there are few viable enterprises, less than40 percent of loans go to enterprises. RCCs, which in general lend more to firms, 83percent in 1994, are reducing their loans to firms while ABC branches are increasingthem. There is also a movement in coastal areas to increase lending to privateenterprises, due in large part to rapid privatization of collective enterprises during themid-1990s (data not presented).For Sichuan and Shanxi, we have a more detailed breakdown of lendingcategories (Appendix Table 1). Enterprise lending is predominant in Sichuan whilehousehold lending is dominant in Shanxi. Household lending also comprises a muchhigher share of lending in poorer townships (over two thirds in the poorest quartile in1998), no doubt due in part to the lack of enterprises in such areas. Except for in therichest quartile, a greater share of loans went to households in 1998 than in 1994. In therichest quartile, lending in 1998 is marked by greater firm lending. Also, loans toagriculture and other loans declined in poor townships but not rich townships. Finally,RCCs lend a much greater share of funds to enterprises than ABCs. This is likely due tosignificant lending by ABCs to marketing agencies such as supply and marketingcooperatives (gongshaoshe) and grain trading companies (liangshi maoyi gongsi).Overall, we observe a greater willingness of financial institutions to lend tohouseholds in poorer townships, and that this relative tendency has become greater over13