China has the clear potential of quickly becoming a world leader in microfinance serving more poor than any other country of the world.There is a huge potential demand and positive experiences have been gained in the delivery of services by NGOs.With the advent of the WTO and its accompanying financial sector reform measures，the commercial banks -including the ABC，may move even further away from serving the needs of the poor，and small and medium entrepreneurs.However，microfinance in China is still in its start-up stage after introduction within the last decade.Along with some other Asian countries such as Bangladesh，India，Indonesia，the Philippines，Mongolia and Cambodia，the progress of microfinance development in China has been slow.However，the outstanding loan portfolio of microfinance in China，if government-operated microfinance is included1278268，may be one of the highest in Asia.The purpose of this paper is to analyse and discuss the policy issues facing the development of microfinance in China，and to provide suggestions to the stakeholder community of how a partnership for progress could be established with specific policy，legal and regulatory recommendations for moving forward.

Due to the diversity of microfinance in terms of operational time and types of organisation，this study will emphasise analysis of policies for microfinance in China in a general sense rather than for any specific type of microfinance organisation.It is noted that microfinance in China is sometimes understood in terms of institutions rather than specific products or methodologies.

The second section describes the evolution of microfinance in China.It is followed in the third section by an analysis of the primary characteristics of the operation of microfinance in general and varied organisations in particular.Section four analyses the legal，regulatory and policy environment facing microfinance institutions in China，followed by the analysis of future directions for microfinance in section five.Finally recommendations are made for stakeholders of microfinance，including the government，central bank，microfinance institutions and donors.