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

Despite the fact that the Rural Credit Cooperatives are the only formal credit providers to millions of households in rural China, empirical evidence suggests that they hardly serve the interests of member households. This study examines the extent to which the recent institutional reform have ameliorated the problems of “insider control” and “collective action” in the corporate governance, as well as local political influence in their operations.This study makes the following contributions to the understanding of China's financial sector reforms: first, it illustrates how the configurations of the Communist Party's power in the post-reform credit institutions are still fundamentally incompatible with effective corporate governance structure; and second, it contributes to the scanty literature explaining why local political interference in loan allocations has been so persistent in China