This paper was commissioned by the United Nations Development Program as a part of its Policy and Advocacy paper series.Written by Dr.Wu Guobao，this UNDP paper also largely benefits from his previous three studies.One is the study on Microfinance for Poverty Alleviation in China，jointly financed by the Asian Development Bank，the Ford Foundation，the World Bank，UNDP and IFAD through the China Foundation for Poverty Alleviation in 2001.The second is the Thematic Study on Rural Finance under IFAD Project Framework in China，financed by IFAD in 2000.The third is a study on the Development Finance for Poverty Alleviation in China financed by the Ford Foundation in 1999.

This paper draws extensively on special contributions from Mr.Roberto Carte，Mr.Peter Kooi，Mr.Charles Myers，Ms.Guo Ruixiang and Mr.Daniel Dexiang Wang for their detailed and constructive comments and suggestions for the first draft and Ms.Helen Perlo for her assistance in editing the draft.