The Communist Party of China (CPC) Central Committee on Sunday set the direction for establishing a modern rural financial system in effort to boost the rural economy.

The guidance was made in a document approved by the committee on October 12 at a plenary session.

It said the country should promote innovation in rural financial system and lower the threshold for establishing rural financial institutions.

The committee also urged the establishment of a sound and safe rural financial system with the integration of commercial, cooperative and policy-based finance.

Financing channels should be widened to steer more credit and social investment funds for rural development, according to the document.

The decision called upon various financial institutions to better support rural economic growth.

Agricultural development banks should work to expand their agriculture-supporting businesses and offer more policy-based financial assistance to long-term loans for agricultural development and ongoing infrastructure construction in rural areas.

Postal saving banks should develop more business in favor of rural development. Banks in rural areas should lend new deposits mainly to local farmers, said the document.

More new-type rural financial institutions should be set up. Small loans should be promoted and more financial services tailored to rural needs and conditions should be encouraged.

China Banking Regulatory Commission (CBRC), the industry watchdog, said on October 9 the country would have more than 100 new-type rural financial institutions operational by year end. Through August, there were 61 such institutions.

Small loans stood at 100,000 yuan (US$14,632) to 300,000 yuan for farmers in developed rural areas, and 10,000 to 50,000 yuan for those in less developed countryside.

The combined balance of deposits in these financial institutions stood at 2.831 billion yuan through August and the combined balance of loans reached 1.917 billion yuan, CBRC figures showed.

The country's central bank decided on October 15 to trial the provision of more small sum credit loans and group guarantee loans to farmers in nine provinces, including eastern Anhui, central Hubei and others.

The CPC decision also allows farmer cooperatives to develop credit cooperation to push forward the rural credit system.

A market operating rural credit guarantee mechanism with government support and public participation should also be set up. Rural insurance and agricultural futures market should be enhanced, according to the document.

(Xinhua News Agency October 20, 2008)