An empirical observation based on investigation data in rural Shaanxi and Qinghai finds that rural financial risk is overestimated while rural potential economic opportunity is underestimated. Relation-based financing makes different effects in private sector lending and regular bank loaning, the former reducing financial risk but the latter becoming a hotbed for seeking financial rent. The essential difference between them lies in difference between the two financial organs in property right and encouragement compatibility. In contrast to regular financing relation, rural financial lending shows a reverse choice.That is to say most loans tend to be offered to grassroots cadres and betteroff families, which causes the Matthew Effect and worsens the polarization in wealth distribution in rural areas. In fact, deadbeats in rural loan market are not necessarily really povertystricken farmers, among whom are some grassroots cadres attempting to seek the chance of seeking financial rent. To better the current situation, rural financial organs and markets are to be reshaped to develop a “credittriggering mechanism” in rural loaning activity, especially in western rural areas where establishing private financial organs is to be encouraged.

rural finance; credit of rural families; relationbased financing; rural loan supply; private finance; credittriggering mechanism