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China opened its door more widely to the foreign banking institutions. The foreign finance house was allowed to set up in Chinese rural areas, which may help to meet the credit need.
 
After the establishment of the foreign banks in Chinese rural areas, the foreign banks were also allowed to set up the finance houses in Hubei Province for the first time. Citibank China declared on October 7 that it had obtained the regulatory approval to set up two finance houses in Hubei from the Hubei Banking Regulatory Bureau of China Banking Regulatory Commission (CBRC). This was also the first time that foreign banks were allowed to set up finance houses in China.
 
According to the introduction of Citibank China, those two finance houses were respectively set up in Chibi City and Gong'an County, mainly operating the mortgage and non-mortgage credit businesses. It was also known that the two finance houses would be put into operation in months.
 
At the end of 2006, the CBRC began to adjust the admittance policy for the entry of the banking financial institutions into the rural areas. It encouraged the setup of the rural banks, finance houses and some other new financial institutions. The foreign banks set up rural banks in the trial provinces (regions) one after another. However, there was no precedent of the finance house set by foreign banks in China.
 
According to the statistics published by the CBRC in August, there were six rural finance trial provinces (regions) in which 31 new rural financial institutions were set up. Among them, there were 19 rural banks and 8 rural capital mutual aid associations. However, there were only four finance houses.
 
Wang Shuguang, associate professor of the Rural Finance Research Institute of Beijing University, thought that the establishment of the foreign finance houses was similar to the rural banks. Because the minimum quota of the registered capital is only 500 thousand Yuan (USD 71 thousand), the foreign finance houses in Chinese rural areas would set a style for the domestic commercial banks rather than supporting the development of the rural areas. For the finance houses set up by the commercial banks, the absolute profit quota is very low. Wang thought that the mode of setting finance houses by folk owned capital was more useful in meeting the credit demand in Chinese rural areas.
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