Evolution of rural finance in China: institutional "lock in" or gradualism?

To mobilize savings and credit with earmarked priority to implement development strategies, financial depression and policy-driven financial institutions dominated the rural financial system in China. The ongoing reforms encourage the entry of private capitals into the rural economy to liberalize the rural financial market. By making a retrospective review on the evolution of the rural financial system in China, we find that there has been negligible progress. The policy-led financial institutions ended up as merely a disbursement window and a costly drain on state budget. Institutional changes were blocked by patching up the existing institutions. Current reform faces challenges for a sustainable and pro-poor financial system.