Currently, many a change is taking place in rural China. Urbanization, marketization, and clashes between traditional culture and modern culture have all contributed to a common rural governance challenge: erosion of villagers’ moral values and breakdown of family-like relations among villagers. This case is derived from Hesilu Village of Chengxijiedao of Yiwu City in Zhejiang Province. The village has made some successful attempts to address this challenge with its innovation project by the name of “Gongdeyinhang” – meaning “Bank of Merit”.

On the one hand, “Bank of Merit” has played a role in promoting moral values among the villagers. Each villager has an account in the Bank, keeping a record of his/her good words and deeds as claimed by oneself or by others. Such claims can also be filed retroactively. The record is then reverted to points according to certain pre-set criteria. All villagers’ points are published in the form of quarterly report, a document that functions as an important criterion for bank loan application and homestead allocation. Assessment of points are conducted by four parties, namely Village Party Branch Committee, Villagers’ Committee, Village Affairs Supervisory Committee, and Voluntary Representatives of Villagers. Information regarding this assessment can be retrieved from Villagers’ Committee. The villager accumulating the highest points within a year is recognized as “Outstanding Contributor of the Year”, thus becoming a moral exemplar in the village.

On the other hand, “Bank of Merit” has become a mature model of rural governance that combines self-governance, rule of virtue, and rule of law. Merits used to be recorded by hand. Therefore, record keeping was time-consuming, and it was hard to categorize the records. Nonetheless, the Bank’s functionality has been improved with the help from the Internet and information technology in recent years. In 2019, a cloud platform was developed for the Bank. Now villagers can log into their accounts to check their points and perform other functions either through Hesilu Village’s WeChat public account or through the Bank’s mobile app.

“Bank of Merit” has some implications for rural governance. First, personal morality and credibility are very important in an acquaintance society. As shown in this case, it is not uncommon for a person with few points in the Bank to become socially marginalized in the village. Second, material rewards may help achieve good governance in rural China. In Hesilu Village, a person with more than 50 points in the Bank can get an unsecured low interest rate loan of up to 600,000 RMB. Noteworthy is that some villagers used this loan as venture capital for their startups, which in turn have contributed to the economic development of their village. Third, it takes time to develop an effective and efficient rural governance project. “Bank of Merit” has been functioning well for over a decade mainly because people have made continuous efforts to improve its functionality, particularly by using digital technology in recent years. It is not a surprise that villages from more than 10 provinces have adopted Hesilu’s “Bank of Merit” as their model of rural governance.