Banking and Small-town Development

While banking flexibility increased in some localities in the 1980s,^[34] Jiangsu banks remained strongly influenced by county officials and were unlikely to invest in projects not approved by the county government.

Banks also became more responsible for their own profits and losses and became more independent of township or county-town officials than they had been of prereform commune officials, who took funds without authorization. So, without county guarantees or government prodding, they are unlikely to invest in such nonproductive projects as expanding urban infrastructure. Not surprisingly, banks are far more interested in investing in rural industries than in urban construction.^[35]

In 1988, whether a settlement was a county seat, a county-town, or a township center affected its access to funds by determining the bank it could approach. Township governments and newly designated county-towns were to rely primarily on Agricultural Bank funds, but if the project called for capital construction, they could approach the Construction Bank for help. If the Agricultural Bank was short of funds, they could go elsewhere too, even though funds were constrained by the county's overall plan. But the county government had much more influence with the Construction Bank, which funds all large construction projects, than county-towns have, so county projects were more likely to find funding than were those of other towns.^[36] In Jiangsu province, then, in the battle for bank loans, the county was likely to come out on top. County-towns that needed large funds for development projects must have their own funding or rely on the county to promote their case with the bank.