1953 FINANCIAL POLICY AND PROCEDURE IN RURAL CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000700150020-1
• Release Decision: RIPPUB
• Original Classification: R
• Document Page Count: 17
• Document Creation Date: December 22, 2016
• Document Release Date: September 13, 2011
• Sequence Number: 20
• Publication Date: November 17, 1953
• Content Type: REPORT

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COUNTRY
SUBJECT
HOW
PUBLISHED
WHERE
PUBLISHED
DATE
PUBLISHED
LANGUAGE
i~ toward collectivising the economy by, among other methods, floating loans
to r.:utual-aid teams and production cooperatives.. Generally, a production
loan will be given in cases where agricultural vi.elds renu;ro ,,,?>.,+ s?;.,~.,,.;..,
The current policy of the state bank is to grant loans to all organiza-
tions engaged in the production and circulstion of agricultural commodities.
.17.though loans are geared to the i::dividunllstic peasent economy, the trend
are able to :mke lot purchases, or where they have marketing outletsVbutyno
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MAR 1952 ~+-"''
N
~?~ ~
CLASSIFICAT10~ }+ESTAtc7?E>;
5. URITY I1JF0AbL1TI0W
CENTRAL INTELLIGENCE AGENCY
INFORMATION FROM
FOREIGN DOCUMENTS OR RADIO BROADCASTS
Economic -finance, domestic credit cooperatives
cD Ne.
DATE OF
Book DATE DIST. ~ 7 Nov 153
~hanghni NO, OF PAGES 17
SUPPLEMENT TO
REPORT NO.
THIS IS UNEVALUATED INFORMATION
Nung-ts'un Chin-Jung Kun-g_tso (Rural Monetary and Banking Work) pub-
1is
the Ch
ung-hua Shu-chu Ku-fen Yu-hsien Kung-ssu
~
1953 1'INANCIAL POISGY' ANL' PACCEDURE IN RIIRAL CHINA
summary: This report gives information, up to idarch 1953,
on Chinese Communist policy and procedure in hand-'ing rural loans,
savings and insurance, and on types of rural credit organizatiw~a.
ldost rural loans are said to be of a stopgap nature because of the
limited financial reserves of state barks. The cadres engaged in
financial activity can negotiate loans for peasants in approxi-
mately X_,000 villages, Loans, at present granted primarily by
agricultural cooperatives acting as agents for the banks, more
and more are to be directly negotiated b~~ the state banks. At
present, there are approximately 8,000 credit cooperative organi-
zations negotiating loans and wr9.ting insurance in rural Chind_7
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operating capital. A tide-over ).onn will be granted in cases where peasants
must repair buildings, purchase clothing, and feed large families, or wher:
currency on hand cannot meet the expenses caused by death, illness, marriage,
or educational needs.
B. Savings
The policy ~f the state banl: is to aaintain harvest surpluses for winter
reserves ox ..amine relief. State banks x111 work with agricultural coopera-
tives toward maintaining substantial monetary reserves and will begin to act
independently in opening savings accounts. In the last 3 years, state banks
have initiated plena called "deposits recorded in simple grain equivalents"
because the peasant fenced the devaluation of currency. When national com-
modity prices became Wore stable, peasant apprehension was allayed, and plans
called guaranteed valuation" were introduced. When prices and currency had
been completely stabilized (July 1952), these plans were abandoned and regular
monetary savings was introduced.
IZ. CLASSIFICATION OF RURAL IAANS
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After Lfay 1"~1, rural loans activity was given a high priority in
national financial planning. In 1951, when production-increase plays.called
for 200 billion catties of grain and 5 million piculs oP cotton, loans were
given primarily for rural water conservation projects, seeds, and animal
husbandry. Loans for rural water conservation projects (field irrigation)
were used primarily for the development of small-scale projects. Loans for
grair. seed were granted primarily to purchasing agencies which were to dis-
tribute to the peasants a high grade of seed. The purchasing agencies se-
lected "losn regions" so that state banks could more effectively grant loans
directly to the needy peasants. Animal husbandry loans were granted for
draft and stud cattle and to promote cattle hygiene. Peasants were urged
to use loan money to buy draft animals. Stud cattle were bought for stnte-
operated breeding stations where peasants may purchase better strains.
Loans are granted in spring and autumn or a:; "constant loans." pro_
duction leans are floated for not more Than cne year and tide-tlver loans for
2 or 3 months.
A. Froduct~o^ Loans
Production loans are to assist peasants meet the purchase price of farm
tools. Rowever, the primary purpose of these loans is to urge peasants to
comply with state agricultural plans and to raise production on priority raw
materials needed for China's industries -- cotton, leaf tobacco, and hemp.
Such lo-zns Hermit peasants to meet state agricultural production demands which
require small-scale irrigation projects.
At present, emphasis is on the acquisition of more and better farm tools
for the ic~provement of production techniques, rather t:,an on losns to al-
leviate financial stress, Peasants are led Lo participate regularly in
mutual-aid teams, in agricultural production cooperatives; and in collectives.
The loan period is from one to 3 years. Secondary emphasis is on rural loans
to peasants unable to buy seed, fertilizer, farm tools, and water lifts, that
is, peasants who have practically no savings.
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B? Transport and Sale Lo n
These loans are floated to expand and strengthen the state-operated trad-
ing system and the network of supply-and-marketing cooperatives. Secondary
Pro~?ccts loans are occasionally granted to small rural traders. tll such
lams are desig-.nd to facilitate the rapid and unimpeded flow of secondary
products to market.
In 1951 and 195x, various rural regions conducted Local Products Exchange
and Urban-Rural Commodities Exchange conferences which ~?adually led to state
control over the private capitalist and individual producer economy. State
bank, promoted urban-rural commodities exchange and strengthened urban-rural
liaison. Loans were granted on a regular schedule. The loans (1) integrate
systemizekandiregulate thermarketingiof n~?iculturalnproducts,nandosupportves,
state production plans; (p) stimulate the flow of secondary products fro?
private commercial enterprises when granted directly to these production ar
transportation enterprises and force them to follow state regulations on
market competition; and (3) enhance the exchange of products between urban
and rural areas by floating loans to wholesale and retail trading enterprises.
C? Tide-Over Loans
P,lthough these loans are granted to peasants so that financial debts in-
currrd as a result of family crises can be met, they must not be considered
relief _oans. inhere are relief organizations specifically set up to assist
peasants during severe natural crisis.
,'ilI loans are designed to stimulate currency circulation in rural areas
and secondary industries in the countryside are given a great impetus toxard
reactivation. These loans are effective in that:
1. 57hen itigh~r echelons send c1o1m general production plans, each hsien
mu.;t ti+ot?ic out the details in accordance with local conditions and return the
plan to the higher echelons for approval.
~? They solve the everyday financial problems of the peasants. The
losn period is comparatively short but needs are promptly met.
3. They ar.e the regular method of establishin; financial liaison be-
tween the state-operated economy and the peasants. The state banks must trans-
act these loans daily on Llteir o:rn initiative and through their own rural
organizations.
All loans comply with th,. principle of e:cpediency. In regions where
1:nd reform has already been thoroughly iwplec.,ented and where harvests hays
been good for a number of ;Years, the financial requirements of agricultural
production J.oane for .;mall farming tools, seed, and fertilizer can be met by
the ~ea:;ants themselves. Long-term loans on horse-drawn farm equipment and
water lift^, are negotiated directly with the state banks, especially if the
equipment is very expensive. Loans for small.-t;;pe farm a?uipment, irrigation
lifts and drainage ditches, fertil.lzer, and seed (which would be classified as
production loans) are designated tide-ever leans because these comparatively
ad?r:-aced rural areas have currency appropriations sufficient to meet small
needs.
In addition to the transport and sale loan, there z.re two rural loan
categories. One ?is the loan tiu?ough state bars and their subsidiaries
which disburse funds for long le:cn periods. ?l.^.nnir:~ is very detailed and
STAT
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the emphasis is on the collective use of funds. The other is the loan for
agricultural production an6 peasant family needs. These include the tide-
over loan and loans to city industrial and commercial enterprises and to
handicraft industries.
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At present, loans are granted (1) directly to the peasants and (2) to
public and private agricultural enterprises, cooperatives, and state farms.
A? Peasant Loans
Since these loans are made directly to the individual peasant, government
supervision is close and the procedure for disbursement is cumbersome. The
procedure fo:? negotiating these loans is as follows:
1. Preliminary Study
Policy deviation is circumvented by conducting thorough prel.'?inary
investigations and study. lduch time and energy is used in explaining '.hat
the policy of peassnt loans is not one of social relief, but an integral part
of the new agricultural production policy. It supports only those peasants
actively engaged in production and solves the financial problems they incur
during the course of this production, but does not approach the arena of
peasant relief.
When a peasant loan is granted, a point of concentration is selected.
Loan coverage for the entire countryside is currently unfeasible and the point
of concentration is a necessary stopgap because of the limited financial re-
serve of state banY.s. Financial reserves are lox and for a long period of
time will be unable to meet agricultural demands. The point can refer to a
village where the hsrveat h..s been poor and the need for loans urgent. Pri-
orities are promptly determined and the funds disbursed. For example, if a
certain village considers that the repair of irrigation ditches is a top-pri-
ority need, such repair will be the point of con,-entration -- more specific
than merely designating the village. In other cases, poor peasants who have
no production funds will be designated points of concentration.
:~ detailed plan and a policy outline are drawn up. All cadres are
subjected to an intensive study of and indoctrination in policy matters.
.account books and calculation charts are made ready. If the loan is to be
given in kind, the greii~ or the cattle should be thoroughly inspected before
it is transferred to tha ?A.~~~..+~
two oi? three loan-cadres per branch-orVsubbranch;cit'rwould bevvery difficult
to disbiu?se funds withnui: +i,o ,,e,....
Disbursement of the losnc m?~+ ,,,, ,...__._, ___. ... ._
- -- - c cudres. It is Imperative,
however, that loan-cadres from the bank comprise the backbone of this ac-
tivity. Current7v_ +hA ...,,a.. ..__ _s ___ ...
leaving the loan-cadres responsible for investigations eandiclarification of
terms.
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At present, poor and middle peasants in China's agricultural
areas will be the major recipients of state loans.
b. How shall the borrower be determined?
Village cadres are now chosen (from among peasants who are pro-
duction activists) and ind ^trinated in loan policy principles. They are then
asked to select, from peasants in their village, currowers to be presented on
a preliminary list. A peasant conference is then convened (or coordinated
with other local conferences in session) and the si-nificance of peasant loans
is explained and the persons eligible, the method of disbursement, the rate of
interest, and the due date are announced. At the conference, borrowers are
selected from the villagers and a new list is drawn up. If the new list cor-
responds, name for name, with the preliminary lis*_, the eligibles are con-
firmed.as the recipients. If the lists do not correspond, the preliminary
list can be discarded or, if the explanations had not been made sufficiently
clear during the conference sessions, another series of explanations is made
and a new list prepareA..
Another way of determining the borrower is to chose from eligibles
who have given personal reports bei'ore village assemblies. At present, few
areas can follow such a method of determination and must rely entirely on
the investigations conducted by state banY.s. Lack of funds is usually the
complicating fector. For example, in 1949, Lao-Chuang Ts'un, Chi Hsien,
some 21,000 Yuan were appropriated for pen^,ant loans. There were 80 farms
represented in the village. After their personal reports had been given,
more than 50 peasants submitted requests for loans. However, only 30
peasants could be given loans and those who were refused were rightly
chained. But even the funds disbursed were inadequate and the borrowers
grumbled constantly. Rural discontent must be avoided. When funds ap-
propriated Por loans are actually insufi'icient to meet the demand, when
personal reports become too numerous; that is, when loan app7.ications are
excessive, the personal report method should be avoided.
c. How can mutual-aid and other teams orient peasant attitudesi
Cooperation and collec~.ivization will be improved if priority
for loans is granted those peasants who join agricultural organizations. The
advantages of state assistance should be pointed out, but rash methods should
rot be ased to organize peasants. Voluntary action is preferred. State banks
give priority to those mutual-aid teams which show high production activity.
Individual peasants should be shown the advantages of ~rga~izing so that their
attitudes may incline toward cooperation and collectivization.
Loans are granted with the state barks as the creditor or with the
cooperative as the vegoti?aing went and responsible party, ilhen the bank is
the creditor, a borrower cell is organized and the duty of members is explained
as follows: (1) to assemble promptly for signing loan contracts, (2) to pledge
that loans -.ill. be used for agricultural production, and (3) to notify fellow
pembers of due date and to act as guarantor for members who cannot repay on
the date set.
Unfortunately, state banks currently cannot handle loans in morn
than 200,000 villages. Zn many regions, cooperatives have been delegated the
authority to negotia:`.= 1o_ns.
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There are many ways to disburse funds through cooperatives. Shan-
tung's procedures are exemplary:
In disbursing the funds for a transfer loan, the state bank
branch or subbranch appropriates the sum and transfers it to the cooperative.
The cooperative negotiates i', loans with individual peasants. Since the co-
operative is the negotiating agent it must guarantee the use in production
and the eventual repayment of the money. The branch or subbranch assists the
cooperative in ?the calculation of premium and interest rates. The cooperative
must pay monthly interest to the bank.
b. Loan With Temporar;; Agent
This means that the state banY, grants the loan directly to the
peasant petitioners. It is negotiated in this way in cases where the co-
operative is newly established and, consequently, inexperienced in financial
matters. The bank regularly informs the cooperative on loan policies, but
retains the promissory note. The cooperative can begin to negotiate loans
after the state bank and the rural state cadres are satisfied that the pro-
cedure has been learned.
c. Loan to Integrate S+~-vly and Marketing
There are two ways of granting this loan:
(1) The loan may be made to the cooperative which uses the money
to purchase production equipment or planting materials for the peasants.
(2) The cooperative may first purchase the equipment and mate-'.
rials and, under the supervision of the bank, lend them to the peasants.
It is still difficult to chose cooperatives to negotiate this
type of loan. Cooperatives are not familiar with banking procedures. Loan
trsnsfers are not really rhnt the state prefers in loan negotiations. As
state bank organizations expand, cooperatives will handle fewer loans and
the banks will more and more assume direct control over the process and the
promissory notes.
Top-level and basic-level banl: organizations will effect investi-
gations to ensure that points of concentration are intelligently selected,
that propaganda concerning the state's policy on rural loans is thoroughly
disseminated, and that regular banking procedures are carefully followed.
All loans will be collected on due date, but exceptions will be made
in cases of emergency. At present, loans are redeemed in the following ways:
~a. Redemption activity must be constant. Monolithic leadership,
scheduled disbursement of funds, and extensive propaganda will facilitate
redemption of loans due.
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If his moaetzry reserve is depleted, a new due date will be set. Occasionally
accommodations may be made to correspond to the financial condition of the
borrower. Supply-and-marketing cooperatives will take repayment in kind.
B. Loans to public and Private Enterprises Cooperative Organizations and
Stat_ a g8ims
Few private enterprises remain in rural China. Hereinafter, the term pri-
vate enterprises Sail]. refer to middle and small trading establishments and
hc'ndicra^t wor{:ahops.
i,ll petitions must be drawn up in written form. :1 production plan
end a finance outline rmst be ;appended: the plan must reveal the stage of
production; and the outline; ::udgetar;r estimates. In adaition, the plan must
give the name, type, number of workers, and operational Procedure of the pe-
titioning o^ganization; the outline must show total capital on hand and in-
vested. '.11 agricultural cooperatives will submit a breakdown on the allot-
ment oi' loan money to various tars ;.nd will append estimates on production
yields, The renuest for funds will be suL?citted only after such plans and
outlines have been received b;- the bank.
if irrigation is to be promoted on a large scale, the water conserv-
ancy organization must dra?..? up a project alsn, an outline of the stages
through which work cri11 proceed, a project time schedule, and a finance out-
line shaving estimates of lai:cr costs and wage-rates. Sma11-scale projects
require Yesrer details.
~? Investigation wad .'.udit
Loan-cadres from the state banla investigate the financial status
of all petitioners . .~.:: cn:dit is rc.ice to determine the financial accuracy
of the petition and the congruity between the production plan and objective
local conditions. It is ir,,erative that the plan l+e in accord with the
nat_onal policy of coopero.Ciwr end collectivization. 1'he cadres will
promptly report; the audit results to the ban'._?ahich, is turn, will make the
decision to gra;~t or re1`.:cc the loan. The decision gill be set down on a
memorandum and in the eve.ri; than. the petition is refused, the memorandum will
be appended to the elan and promptly returned to the petitioner.
3. Disbursement
"'pen a loan ha, been authorized, the ban.. will make'out a notifi-
cation and append to i` ~. blanL loan certificate (for loans to large-scale
water conservation projects; a contract ?.rill be appended for signature).
The petitioner :ai11 be ash:ed to ful_ cat and endorse the lour certificate and
produce a gu^rantor. The guarantor must aff:-~; his anal to the certificate
sand return it to the bank. Upon receipt of the certificate (or contract),
the b;:n;: will investigate the berck~?owad of the ,;uaraator, and, if everything
is in order, the loan will be gx?antcd.
The loan may be dr._wr. upon the b;n!;. L?ut the procedure must comply
wit'? the agreement proposed in the loan cart;ificate or contract. The money
may be disbursed in a lump sum or 'in sr.:ll p:=;meats. If the money is to be
transfered to .: 'third party, the hIonet:ary Coat: of Law vast'. be complied with.
T'nat is, the borrower will sign with the ban;: for the money and the bank will
trsn11]r ane1r.:sh, to the peasant petitioner rather than toy>he third party
( y ~.icultnral cooper:.tive). The ban], will hold the promissory note.
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STAT
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The banks x311 delegate inspectors to check on whether or not loan
funds are being used in compliance with the production plan, finance outline,
sad the agreements. proposed in the loan certificate or contract. Inspection
is imperative?becauae most loans currently granted in rural China are in cash.
Production must be enhanced and capital preserved.
When the bank receives the inspection report, the case under study
is ad,~udicated on the basis of precedent, and a report is drafted giving the
inspector's opinions; a copy is made, and the original sent to a highlevel
bank. Should it be decided that the loan funds were misused, the bank may
either discontinue the loan or raise the interest charge.
5. Repayment and Renewal
One month before due date, the bank will notify the borrower that
the principal and interest are due. When the borrower has cleared his ac-
count, the bank will so signify in writing (across his loan certificate).
If the loan is repayable on a schedule basis, then before the last payments,
the tank will issue payment receipts for each payment and write ''schedule
Payment" on the loan certificate. When the principal and the interest have
been cleared, the borrower will turn in his payment receipts and receive his
original loan certificate in return.
If the due date has been exceeded, the borrower will be so informed
in wri*?ing by the bank, which will also demand payment and affix additional
interest.
If the borrower is unable to meet the due date, he must inform the
bank in advance, state the reason, and request renewal. The additional
interest (or interest fine) will be charged in all cases where renewal re-
quests have not been submitted.
Upon receipt of the renewal request, the bank will investigate and,
on the basis of the use to which the funds are being put, the source of re-
payment money, the ngricultural season, and specific hardship, will decide
to grant or refuses t'ce renewal. The borrower and the guarantor will be in-
formed of the decision.
4. Inspection
a. Collection of Interes`~ and Renewal of Principal
Loan renewal will be handled in four different ways;
b. Renewal of Principal and Interest
c. Renewal in Part
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RESTRICTED
d. Renewal of Original Loan Certificate
If nattn?al crisis have so devastated an area that ell or moat of
the loans granted cannot be paid up, the bank will send inspectors. The local
government will proclaim the territory an emergency area and the bank will not
presb claims, but will issue new loan certificates.
With the exception of regional variations, the above-mentioned procedure
for granting and renewing loans are, as c March 1953, operative in China.
The fullowing outline shove the steps:
A. Petition far Loan
1. Fill out loan petition
2. Append production plan and finance outline (or pro3ect plan)
3? Dispatch investigator and receive report
B. 'Consider Loan
1". Approve loan
2. Refuse loan
C. Write Loan Certificate (or Sign Contract)
D. Produce Guarantor
E. Issue Loan
1. Disburse in lump sum
2. Disburse in small payments
F. Supervise Disbursement .
1. Employ cooperative as agent
2. Disburse directly to peasants
G. Inspect Loap Use (Consult Inspection Report)
H. Notify on Due Date
I. Redeem Loan (use one of the following
1. By allotment (use payment receipts)
2. Write "pat a." on loan certificate and return duplicate
3. Write overdue notification when needed
J. Request Renewal (use one of the following)
1. Collect interest and renew principal
?_. Renew principal and interest
3. Rene>r in part
4. Renew original Loan Certificate
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RrSTRICTED
IV. CLiSSIFIC~iTION OF RURAL SAVINGS
A. Significance of Rural Savings
Capital reserves in the countryside will spur agricultural production
and tide over needy peasants. Peasants are daily becoming more prosperous.
According to statistics Yrom Shansi, the per capita purchasing power of
peasants in the province was 43.69 catties of millet in 1949, 157 catties
in 1950, and 275 catties in 1951. The Runan Provincial Commerce Office
estimates show ?theper capita purchasing power of peasants was 168,550 yuan
in 1950, 199,400 yuan for 1951, and 230,000 yuan for 1952. In Chi};sang,
the per capita purchasing power of the peasants was 97 catties of rice in
1949, 150 catties in 1950, and X50 catties in 1951.
On 7 June 1951, the Peiping Jen-min Jih-pap stated editorially: "el-
though peasant prosperity has facilitated the exchange of local products
at present there are a
surpluses. This means thaettnational savingspandainsurance operationspm~tin
be effected.
"Between March and April 1951, more than 200 rural currency cells in
Chahar accumulated more than 4,500,000,000 yuan in deposits, thus exceeding
by 80 percent the 2,500,000,000 yuan in private, individual deposits for
1950. By February 1951, the branch bank in South Szechwan exceeded by 183
percent the total deposits recorded for the first quruter of 1950. The Jen-
shou Subbranch Bank, South Szechwan announced that 98 percent of all pri-
vate deposits were in the name of peasants. In four $opeh villages, each
person held an average of 258 catties of surplus rice.
"If savings operations are not speeded, this surplus money will tend
to accumulate in the hands of these peasants aid will not be made avaiiabl.e
for the nation's cooperative production programs."
The purpose of rural savings is (1) to e::pand reproduction, (2) to
make capital available for reproduction by preventing capital frog accumu-
lating in the hands of individual peasants (by means of savings activity
rather than coercion or confiscation), and (3) to regulate the flow of cur-
rency betweer, the city and countryside.
The following statement was made by the president of the South Branch
People's Bank:
"The development of China's agriculture is uneven and, for some time
into the future, will become mare uneven. When the peasants harvest a crop,
they hwve on hand salabl? commodities which are additional to what was set
aside for food and taxes. },Then these commodities are sold, peasants have
exchange value with which to buy industrial goods. The state must support
trading. But people's currency is accumulated by peasants in proportion to
the volume of agricultural products sold; and since industrial goods are '
still scarce there are many consumer products which are unavailable to the
peasants. Thus, large amounts of rural surplus currency flow to the city
r?arkets, bids for indu^,trial goods are numerous, and prices of consumer prod-
ucts rise.
"If state ba~l;s fail to initiate operations in the countryside during
this emended period of agriculture-industry imbalance, the following re-
sults will occur: (1) there will be a money scarcity in trading, agricul-
tural products ui11 not be purchased, and the rural eco.,omy will be given
no support sad (2) after trading, there will be a rise in `.he.price of
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industrial goods an3 a failure to supply peasants with some consumer products.
To prevent thia from causing peasant discontent, we must consign some of the
peasants' surplus capital to state banks to be held in the form of savings."
B. Types of Savings Accounts
r+t the First National Rural Finance Conference it was decided that cadres
would be sent to the countryside to integrate rural loan and insurance organi-
zations, cooperatives, and trading cells with the hsien subbranch banks. De-
spite the fact that natural crisis and uneven production development often in-
volve state banks in huge losses, the banks must continue to promote savings
activity among the peasants.
At present, there are the folloxing four types of rural savings accounts:
1. Current i+ccount
Since a Deposit Boot. is required, this account is commonly called a
Deposit Book Savings Account. The book must be shown upon deposit or with-
drawal of money. Interest is calculated on the basis of current deposit
interest levels in nearby cities and, like the Fixed Account, the lowest rate
is chcsen. *dithdrawal is not so easily executed as in the case of the Fixed
:+ccount beca;;se wi~4drawal can be made only on the bank which opened the ac-
count. Unlike the Dep .it Voucher of the Fixed Account, the Deposit Book can-
not be used hsien-wide. Therefore, it is usually more convenient Por the
depositer to bank nt the branch nearest his dwelling.
2. Fixed Money Account
A Deposit Voucher i~ used. This type of account is useful because
(1) withdrawal or deposit can be ek~de at any time within the period of one
year after opening the account, (2) any bank in the hsien can be drawn upon
(depositor's name is not required on the voucher), and (3) interest is high
and, 7 days after initial deposit is taken, increases daily. This account is
convenient for peasants because of its simplicity. But the banks find it
difficult to keep records of the initial deposit since deposits and withdraw-
als are being made constantly and with a;,y bank.
iur cne oanrs do xeep records on the initial deposit when payments are
scheduled and the szme bank is visited.
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teams or production cooperatives with capitsl reserves open savings accounts
i~ith state banks.) In time of need, either the banks will flaa`., peasant loans
or the supply and marketing cooperatives will meet pcasart needs. The sign-
ing of a three-corner agreement (1) ensures that materials will be available
for ;,;oduction and everyday needs and gradually brings the dispersed small
peasant eco.:omy under the control of the state-operated economy; and (2)
strengthens the financial liaison betweei ;he peasant, the cooperative, the
mutual-aid team, and the state bank. Since the banks are required to in-
vestigate the production plan and finance outline, they are in a position to
know the amount of harvest yields, quantity of ..upplies and grain surpluses
on hand, and the amount of capital deposited by each of the rural cooperative
organizations. This improves financial control in the countryside.
spring 1952, 3 Percent of insured cattle in Kwangtung died and again all
owners were indemnified.
n the rela?ively new Central-South Administrative Area, by July 1952,
5,140,000 head of draft cattle were insured. In Kiangsi during 1952, one
percent of all insured cattle died, but all owners were indemnified. Since
A. State Policy
Rurs.l insurance is designed to assist peasants in preventive, i. e.
antidrought, antiepidemic, and antiflood work and to guarantee harvest yields
and insure cattle. The results have been Tavorable since 1949. For example,
i
B. Types of Rural Insurance
l.' Cash Crop
3. Capital Goods
operative. -The other types are in the planning stage.
a. Domestic Animals
and improvement of strains are now regular veterinarian responsibilities in
those regions where the PeopJ.e's Insurance Agency operates.
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are properly fed ands aredefor,lare healthy,iarehnot diseasehriddeneornin~u?ed
in ^ny way, and are regularly used; for draft work in agricultural production.
The color, height, weight, age, and sex of the animal ie recorded with the
Insurance Agency. An insurance company, organized from peasants in the vil-
lages, will, after consultation with the locrl administration chief and the
Peasant Association, estimate the worth of the animal, determine the corres-
ponding premium rate, and draw up the insurance policy.
(2) Age
Insurance will be written for cattle from 2 to 15 years of
age, horcea from 3 to 18, mules from 2 to 20, and donkeys from 2 to 12.
(3) Insurance Liability
The Insurance Agency must indemnify policyholders whose
.rituals have to be slaughtered legally because of incapacitation resulting
from illness, labor in birth, castration, lightning, fire, leg injury, and
drowning or any unintentional mishap resulting in death. The a,;ency- will not
be responsible for loss of animals who have strayed, or have been stolen, or
who have been lost during warfsre, or through intentional slaughter.
(1) Requirements
- -- - ??~, u~a+~ nun oreeaing aonxeys and draft mules at
4-5 Percent, and camels at 7 percent.
(5) Term
(k) Insurance Premium Rate
(6) Indemnity Procedure
agricultural plans. It was ini+iated in~1950 tc promote`~hina's cotton4pro-
r7?ri:i nn nrnm~nm
Insurance will be written for those state farms, ccoperative
fnrmc n?i.m +nl.. ..?e?~a,.a o., ..__ _._. _ _._ _
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(2) Liability
werr. ruined by windstorms,cfloods,idroughtY spoilationdfromwhxcessiveohumidity,
frc?ts, and fire or insect blight. If the crop has been ruined by Warfare,
theft, or from having been trampled or eaten by other peasants' cattle, or
throngh the use of improper plowing methods, failure to replant cotton sprouts
ruined by unfavorable weather conditions, or failure to take precautionary
measures before and after planting, the agency will not be responsible or
held liable. These propositions are more stringent than those in animals
insurancy policies because cotton io vital to China's economy and its connec-
tion with industrial production programs is close.
(3) Premium Rate
At the least, rates are set at 5 percent of the estie?_ted
yield and must be paid in people's currency.
(4) Term
cotton harvest; the exactcterminationidaterdependssonothengate ofecottons to
growth.
(5) Indemnity Procedure
The policyholder must inform the Insurance Agency through
the village insurance company. when the agency has investigated and confirmed
the accuracy of the claim (which is then sent to and reviewed by the Committee
for the Promotion of Cotton Insurance), the petition can be filed for indem-
nity. Indemnity is figured on the basis of labor, fertilizer, and equipment
coats.
~(a) Yield Estimates ?-? Premium Determinations
If the estimate of the anticipated harvest is too high,
the nation will lose money; ii' it is too low, the peasants will not be justly
insured. Therefore the procedure for yield estimates and premium determina-
tions is more flexible than the one used in determining the regular State
harvest tax. In the latter, the tax charge is fixed, there are no adjustments
in the charge thereafter, and the tax is collected despite the volume of yield.
Estimates for ~nttnn ~?~,...?...... _,...____ .____ _
mutual aid anon the --- '" ?~a1C? ~u improve
g peasants. Insurance cadres will be held responsible for
P~iri t{nv rnnnnwn+l.... t.. ,..L __ ___. _
e erminations be flexible.
would be losing the Insurance A enc "' ~""'~=r meznoas
g y'~ money. Thus, it is imperative that
estimates and d t
? A reestimate of the vie7d an tirtn?+?a .,,,, ,... _.,~_ __.__
original estimate must be adjusted downward. The cotton insurancerpolicy may
then be dravn un anA ~tRnea
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'(b) Precautions
The responsibility for flood and drought control opera-
tions lies with the agricultural organizations. The Insurance Agency func-
ticns solely as coordinator.
(c) Insurance on Quantity of Yield
be the sole basis forTinsurancety~Poor cultivation methods andtadversedcropl
conditions reduce boll quslity, but total yield quantity is not affected.
Although insurance polic?es which take qualitative changes of the boll into
account are being considered, they are nut yet being written.
(d) piethod and Significance of Incentive Awards
and activists, with the nati~atepatrioticaProduction Increasecfovement,cand to
spur them on to new production records, the Insurance Agen.:y has devised the
following incentives: (1) each cotton farmer whose yield is 60 percent
above the average yield recorded in his village and (2) each farmer whose
yield is 60 percent above the next highest yield will, in either case, re-
ceive a reduction of 60 percent in his annual insurance premium.
VI. CLASSIFICATION OF RURAL CREDIT COOPERATIVES
A. Loans From Independent Farmers
Soon after land reform had been completed in a rural area, independent
peasant farmers who had money and were in a position to lend to the less
fortunate preferred not to uo so because they feared thnt the loan would
never be repaid and that they would be exposed bs rich peasants. Rural
credit cooperatives were quickly expanded to alleviate the situation.
B. Development of Rural Credit Cooperatives
The cooperatives are similar to those established in 1942 in the Shensi-
Kansu-Ningsia Border Region. By D1arch 1953, the number of credit cooperative
organizations reached n total .of 8,000-odd units. Of these, 1,776 are credit
cooperatives, 5,239 are credit mutual-aid teams, and 1,126 are credit supply-
and-mar}:eting cooperatives.
In 1950, Shansi had 232 credit cooperative organizations: 20 were credit
cooperatives, and 5 were credit cells. The 20 credit cooperatives employed
15
108 persons
had a t
tal i
,
,
o
nvestment (in rice) of 570,000 cattier,
126,690,000 yunn (in cash) on hand. 109 milhnn u?pn a? .~e,.,,.,,..,. ~.,,, ,.,.,.
-,~.-,--- ------- ~,. .,.. ~~~a?uiup5 commaaitiy loans.
1.V GC,
credit bureaus and credit ~upP~lr-=nd-marketing cooperatives to 571, and credit
cells to 144; in all, S87 credit cooperati?re organizations. These covered 8
....?..,...a ,.o .,,, ..n_,_, _~__~, .__
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In 1951, the Hu-kuan Pai-ch'ih and the Huang-shan Credit Cooperatives of
Shansi supported peasant purchases of 428 draft animals, 178 sheep, 200,000
cat.t,es of fertilizer, and 2,000-odd pieces of farming -~uipment. The Huang-
ahan Cooperative floated loans to help 342 sick peasants and to tide over
another 15 who had incurred debts because of marriage or death in the family.
D. Types of Rural Credit Cooperative Organizations
The three mayor types of rural credit cooperative organizations are:
1. Credit Mutual-Aid Cell
C. Function of Rural Credit Cooperative Organizations
The credit cell is really the most common form. There are usually
one, or not more than two or three, in an administrative village. They are
established under a mutual-aid charter and directed by a cell chief and his
deputy. The charter stipulates that:
a. idutual-aid cell members will be assiduous in production, frugal
in living habits, and helpful in supervising fellow members (as fellow members
supervise them).
b. Atembers will elect a chief and his deputy who will be responsive
to the decisions of the cell conference.
c. The chief and his depu'.y will have charge of cell funds and keep
the accounts.
e. Loan and savings programs will be directed toward serving mam-
bers, although non-cell peasants will be permitted to mare savings deposits.
f. The cell will be strict with loans (there will be no payments in
arrears or repudiation of debts incurred, surplus capital or grain will be
divided equally, and deficits will be borne equally by members.
g. Cell members may request loans at assembly sessions and approval
or refusal will be decided promptly by vote.
h. All loans and deposits will be i?corded on certificates and in
deposit books.
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RESTRICTED
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3?. Credit Cooperative,
The credit cooperative operates as a support organization for the
s'~te bank. It covers an administrative village and its immediate environs.
The credit cooperative must:
a? Follow and comply with all directives from the state bank in the
coursQ of:
(1)
Collecting members' cash or grain for savings deposits.
over needs.
(2)
Lending cash or grain to members for production or tide-
members.
(3)
Lending cash or grain, with state bank approval, to non-
(4)
Acting as general financial agent for the state bank.
b. Integrate operations with the state bank and the state-operated
trading organizations..
c. Accept petitions for enrollment in the cooperative. All males
and females 16 years of age may apply for membership. Enrollment fees and
initial investments must be collected from each new candidate. In event of
a member's withdrawing from the cooperative, his investments but not his
enrollment fee will be refunded.