Opportunities for Financial Inclusion in China

Digital financial technology, and particularly the accelerated adoption of mobile phones around the world, has facilitated expanding access to financial services to hard-to-reach populations and small businesses at low cost and risk, according to the World Bank:

  • Digital IDs make it easier than ever before to open an account

  • Digitization of cash-payments is introducing more people to transaction accounts

  • Mobile-based financial services bring convenient access to remote areas

  • Greater availability of customer data allows providers to design digital financial products that better fit the needs of unbanked individuals

Massive lack of financial access in certain fast-developing countries has its hidden advantage in the long term for the economic and innovative potential of those nations. Having no long-established infrastructure and no traditional path of usage of financial services in a large part of a country, non-urban in particular, developing nations get to learn from the history of others and jump through stages of development, building the next generation of banking infrastructure and all associated niches from the ground up. China is one of the countries leapfrogging ahead in its adoption of advanced technologies across industries.

Since the early 2000s, Chinese policymakers have prioritized broadening the availability of basic financial products through improvements in credit and payments infrastructure, expanding physical access points for rural consumers, and establishing new types of financial service providers, the World Bank reports. And China has achieved considerable success in expanding uptake of a basic but essential financial instrument: the store-of-value transaction account. In 2014, 79% of Chinese adults reported owning at least one store-of-value transaction account, a category that includes transaction and deposit accounts at regulated financial institutions or e-money providers. PBOC currently estimates account ownership to be above 90% in China.

Inclusion is highly contextual and comes in many forms. In some countries, inclusion is not about account ownership, but financial health that enables individuals to invest in their future well-being and improve the quality of life through generations. In others, inclusion is at an earlier stage – the opportunity to plug into the formal financial sector through a basic account.

Inclusion also touches areas such as health and stability in the face of unexpected hardships, which can be achieved through insurance solutions.

With the context and stage of development comes the opportunity: cultural hallmarks and rates of adoption across segment dictate opportunities for inclusion and innovation that the private and public sectors can take on.

Challenges & Opportunities

China has its own hallmarks when it comes opportunities for financial inclusion and innovation adoption across FinServ segments.


Despite the significant progress made in recent years, some Chinese adults still lack a basic financial instrument to make and receive payments and store value. These adults are disproportionately poor and live in rural areas, studies suggest. A report called Benchmarking China’s Financial Inclusion Progress published in February, states that the rate of account ownership among rural residents in China is lower than the corresponding value for urban residents. Given that the Chinese population is overall considerably more rural than that of the average G-20 country, achieving rural-urban financial inclusion parity is a larger and more significant challenge in China than elsewhere.

The study points out the important distinction between ownership and usage: 11% of account-holders in China report not making any deposits or withdrawals from their account in the past year, similar to the average across G-20 countries.

Beyond ownership and use of store-of-value transaction accounts, using digital instruments to transact is a key indicator of digital financial inclusion. Overall, according to the study, 31% of Chinese adults report using a debit card, Internet platform, or mobile platform to make payments in the past year.

The popularity of e-commerce and social network-based, non-bank digital payment platforms have made internet-facilitated payments and mobile phone payments (not mutually exclusive categories) relatively prevalent in China.


Savings behavior is relatively prevalent among Chinese adults. About ~72% of Chinese adults report having saved or set aside money in the past year. Most savers in China use formal financial institutions to do so, likely because of the high ownership rate of accounts.

Because Chinese adults tend to save funds, personal lending in the country may not be the most favorable space for development for private companies. It is also enforced by cultural hallmarks, where individuals tend to turn to family first for loans and saving is a widely adopted way of ensuring long-term stability and care for the old age.

31% of adults in China report saving, but not at a formal financial institution. Formalizing the ‘hidden’ savings of these informal savers remains a significant opportunity for the financial sector and may also indicate the need to develop simple, accessible, and low-cost savings products, particularly for individuals with low and irregular incomes.

Interestingly, credit cards do not appear to be a widely used financial tool among rural residents and the poor in China, the report notes. Just 4% of adults in the bottom 40% of the income quintile and 6% of rural residents report having used a credit card in the past year.


Citing CHFS, the paper reports that ~87% of working age (21 or older) and retired adults in China are covered by social health insurance, a category that includes various insurance programs like basic medical insurance for urban workers, new rural cooperative medical insurance, student health insurance, etc., but does not include commercial health insurance.

Among adults living in rural areas, social health insurance coverage reaches 91%.

As of 2015, ~7% of all Chinese individuals (all ages) purchased or were covered by non-vehicle commercial insurance, which includes business life insurance (covering 4% of Chinese individuals), commercial health insurance (2%), and other commercial insurance (1%).

Business Financing

At the basic level of access to payment and savings services, account ownership is nearly universal in China, with >96% of firms owning a checking or savings account. Even among small firms, the account ownership is estimated to be at 95%.

The survey data presented in the report reveals that Chinese firms primarily fund investments (fixed assets) through internal financing. On average, firms in China finance 90% of their investments using internal sources of finance (retained earnings).

Relatively little variation in this indicator is observed across firm size. (About) 15% of firms in China report using banks to finance investments and bank financing accounts for approximately 5% of funding for investments. Among small firms, just 4% use banks to finance investments, and bank financing accounts for less than 1% of funding for investments. Across all firm size categories, Chinese firms are less likely than their counterparts in G-20 MICs and EAP L-MICs to use banks to finance investments. – The World Bank


China’s experience provides valuable lessons to authorities in other countries who are fashioning their own pathways toward sustainable and long-term financial inclusion. For example, on the policy side, the prioritization of financial infrastructure development and policy approaches to reaching ‘last-mile’ consumers are important lessons that can be drawn from; on the market side, online network-based business models have been a critical factor in the success of FinTech in China by leveraging network effects, technology, economies of scale, big data, and cross-subsidization opportunities. – The World Bank