The central bank on Wednesday urged banks in Shanghai to keep a reasonable loan growth and improve credit structure in the second half.

Banks should improve their loans structure amid the current lending quota system, Su Ning, deputy governor of the People's Bank of China and the head of the Shanghai headquarters of the central bank, said on Wednesday.

Banks should also strengthen supervision on foreign currency flow and effectively protect against the hit from short-term capital flow, Su pointed out.

Credit ran smoothly in Shanghai in the first half as banks followed central government measures in offering loans, the central bank said.

Outstanding value of credit at overseas and domestic banks rose to 2.36 trillion yuan (US$302 billion) as the end of June, up 16.5 percent on a year ago. The outstanding value of deposits rose by a year-on-year growth of 18.7 percent to 3.3 trillion yuan, the central bank said.

New lending added 184.95 billion yuan in Shanghai in the first half, up 21.33 billion yuan than a year ago.

Banks should also closely watch the assets market and ward off risks, the central bank said.

Chinese banks have begun shifting from the traditional deposit-lending business to fee-based income to diversify profits channels.

Steady growth and the prevention of rapid price increases will be the main goals of economic policies, the central bank said in its second-quarter meeting.

(Shanghai Daily July 31, 2008)