NEW BANK VOWS TO AID CHINA'S RURAL POOR

China's revamped postal savings system yesterday opened for business as the country's fifth biggest bank, pledging to improve its reach in rural areas where financial services and capital are scarce.

The launch of the China Postal Savings Bank followed years of delay and dispute over how to reform the sprawling postal bureau, which at the end of last year held Rmb1,600bn (£106bn, $207bn, �56bn) in deposits through more than 36,000 branches.

In an inauguration address, Liu Andong, bank chairman, said it would “enhance the development” of China's countryside by making particular effort to offer credit to rural households and companies. “After its establishment, the China Postal Savings Bank will actively perfect its service network . . . and progressively improve the rural financial environment,” he said.

Such a strategy should quieten criticism that the postal savings system sucks capital out of poorer regions where money is already scarce, since it puts almost all its funds in accounts with the central bank, other financial institutions or the inter-bank bond market.

Pumping capital out of the cities would also match the central government's goal of narrowing the yawning income gap between urban residents and China's majority rural population.

However, while creation of the new bank is a landmark in China's wide-ranging financial system reforms, it is unclear how well equipped it is to act as a commercially responsible lender.

The bank said it would offer services including small loans and consumer credit, but gave no details.