CHINA will step up monetary policy support for rural areas and encourage local firms to raise funds in the capital markets, said a central bank vice governor, pledging that the government will help facilitate funds to reach the rural economy.

China’s rural economy, comprising small farm holdings and low-end industries, is in particular need of policy support, with local populations rapidly greying, productivity slumping and few growth engines in sight.

As the broader economy slows this year, the People’s Bank of China has cut the amount of cash that commercial banks need to set aside as reserves four times to spur lending and help local businesses.

China will continue to keep reserve requirement ratios low for rural financial institutions, Zhu Hexin, a vice governor at the People’s Bank of China, said Thursday.

Measures should also be taken to ease the financing problems facing businesses, such as minimizing banks’ over-reliance on collateral and guarantees when lending to smaller firms, the banking and insurance regulator said this week.

China will effectively expand the range of collateral that could be used for loan applications in rural areas, Zhu said.

It will also encourage rural industrial enterprises to go public or issue bonds to raise funds, he told an international forum on China’s poverty reduction efforts.

Innovative financial products based on rural property rights will be created, Zhu said.

The government has pledged to spend billions of yuan on poverty alleviation and to boost the rural economy.

(SD-Agencies)