China's banking regulator has asked banks and credit cooperatives to ensure credit to grain producers and agricultural firms yesterday, in a move to spur grain production and aid reconstruction efforts of production areas in earthquake-hit Sichuan province.
Commercial banks should grant more loans and credit to support grain production as grain supply pressure continues to soar in China, said Zang Jingfan, director of cooperative finance supervision department of the China Banking Regulatory Commission (CBRC).
The director said that banks' rural financial service levels in quake-affected areas should not be lower than before the earthquake.
He also said that the government has fast-tracked the approving process for branches and outlets open in Sichuan Province.
Until now, the regulator has approved Pudong Development Bank, a Shanghai-based commercial lender to set up a branch in Mianyang, Bank of Shanghai, a city commercial bank, to establish a branch in Chengdu and Ya'an City Credit Co-operative to transform into a commercial bank.
The regulator has selected six counties and cities including Shifang, Mianzhu, Qingchuan, Dujiangyan and Jiangyou as pilot areas for developing new rural financial institutions to attract more funds for reconstruction of the disaster-hit areas.
More investment will find its way into rural financial market as the regulator has framed new rules to broaden investors' and institutions' access to the market.
The regulator said it will help to diversify the ownership of rural financial enterprises and loosen investment restrictions for financial institutions.
It will loosen restrictions on investment caps, localities and venture capital financing channels for financial institutions to invest in small rural financial institutions, it said.
According to CBRC data, by the end of 2007, combined assets of small and medium-sized rural banking institutions amounted to 5.6 trillion yuan ($800 billion), up from the 2.2 trillion yuan in 2003.
Agricultural loans issued by rural financial institutions jumped by 8.3 percent from the end of last year to 1.51 trillion yuan at the end of March.
"The hefty rise in agricultural loans mainly comes from short-term loans, which reflect banking institutions and rural credit cooperatives' move to significantly step up support for rural development," Zang said.
The banking regulator called on commercial banks and rural cooperatives to continue following credit ethics to support reconstruction of Sichuan's grain production areas.
The devastating earthquake would make it harder to ensure grain supplies this year, said Chen Xiwen, the director of the office of the central leading group on rural work. The grain price rise also adds pressure on China's grain production.
China' grain output exceeded 500 million tons last year, 15 million tons less than the total demand, official figures show.