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Banks to support local gov't financing: report

(Xinhua)

08:26, August 01, 2012

BEIJING, July 31 (Xinhua) -- China is likely to see a new wave of investment at the local level, as some Chinese commercial banks have been encouraged to provide credit support for the country's local financing vehicles to secure growth, a Chinese newspaper reported Tuesday.

Bank loans will mostly go to highway and railway construction, natural gas and clean energy projects, as well as other projects related to people's well-being, the Beijing-based China Securities Journal (CSJ) reported, citing sources with banks.

An earlier report from CSJ revealed that some of China's local government investment platforms are facing rising pressure to pay their debts this year, and bankers have suggested "a certain degree of" loosening credit support on provincial-level projects or key projects to prevent such projects from going unfinished.

Shang Fulin, chairman of the China Banking Regulatory Commission, has also pledged more effective support for development in the real economy in the second half of this year, including more credit support for agricultural production, infrastructure and public housing.

But Shang also promised to further strengthen risk management over local government financing vehicles, especially risk control in property loans.

China's new yuan-denominated lending in June rose 285.9 billion yuan (about 45 billion U.S. dollars) year on year to 919.8 billion yuan, according to the People's Bank of China, the central bank.

China has intensified efforts to clear the massive debt of its local governments, which amounted to 10.7 trillion yuan at the end of 2010, in an effort to prevent widespread defaults from destabilizing growth in the world's second-largest economy.

In late June, China's Minister of Finance Xie Xuren vowed that the country would strengthen local government debt management and strictly control new borrowing to prevent fiscal risks.

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