The Communist Party and Financial Institutions: Institutional Design of China's Post-Reform Rural Credit Cooperatives

Although the rural credit cooperatives are the only formal credit providers to millions of households in rural China, empirical evidence suggests that they do not serve the interests of member households very effectively. This study examines how far the recent institutional reforms have addressed the problems, of insider control and collective action in corporate governance and reduced local political influence on their operations. It contributes to the currently scant literature on the reasons for the persistence in China of local political interference in loan allocations. This study's findings suggest the need for a re-evaluation of the conventional wisdom that the role of local states in China's development is a positive one.