Chinese banks and credit cooperatives granted significantly more loans to the nation's rural areas in the first quarter, as the government calls for greater funding support to agriculture and restraint in lending to overheated industries.

The China Banking Regulatory Commission (CBRC) said Tuesday outstanding agricultural loans jumped by 13 per cent from the end of last year to 1.34 trillion yuan (US$161 billion) at the end of March. The increase was 28.4 billion yuan (US$3.4 billion) over the same period last year.

Short-term loans stood at 976 billion yuan (US$118 billion), which was 141.2 billion yuan (US$17 billion) more than at the end of last year, an increase of 56.1 billion yuan (US$6.8 billion) over a year earlier.

Short-term loans accounted for 94 per cent of the first quarter's total increase in agricultural loans, the CBRC said.

"The hefty rise in agricultural loans this year mainly comes from short-term loans, which reflects, under the guidance of State industrial policies, banking institutions, especially rural credit co-operatives, have significantly stepped up working capital support to this spring's farming activities," the commission said.

Short-term agricultural loans, with maturities not longer than one year, typically finance farming activities, processing and transportation of agricultural products as well as research.

Chinese banks have typically been reluctant to grant such loans, many of which consist of small amounts, for their high cost and low profitability.

(China Daily May 12, 2004)