Growth in bank loans to heavily polluting and energy-consuming sectors saw a decrease in the first five months as banks responded to a government policy of reducing waste and enhancing environmental protection, the banking regulator said on Friday.

By the end of May, major Chinese banks had 1.5 trillion yuan of outstanding medium- to long-term loans to such industries as coking, chemicals, steel, non-ferrous metals and power, up 21.8 percent year-on-year. The growth rate was 9 percentage points lower than the same period of last year, the China Banking Regulatory Commission (CBRC) said.

From January to May, banks lent 104 billion yuan to these polluting and energy-intensive sectors, 52.7 billion yuan less than that in the same period of last year.

The CBRC found that all major banks have curbed loans to the sectors.

A sample survey among city commercial banks showed that banks are shifting their financing support to key enterprises with advanced production facilities and core technologies in energy-saving or environmental production.

Yet "production in energy-consuming and heavily polluting industries still grows at a relatively rapid pace and the task of saving energy and cutting emissions remains tough", the CBRC said in the statement.

It requires commercial banks further curb lending to energy-intensive and high polluting industries.

Banks should stop lending or call in existing loans for projects that violate State regulations, the CBRC said.

Banks also need to strengthen their monitoring on loans to the blacklisted sectors, in case of any change that is not in line with government policies, it said.

The CBRC is also encouraging banks offer financing to key energy-saving and emission-reducing projects, anti-polluting programs.

The regulator said it will adopt an incentive supervision policy, linking implementation of "green loans" and related works with bank ratings, market entrance and appointment of senior executives.

A week earlier, the central bank issued guidelines urging banks stop lending to polluters and said it will work with State Environmental Protection Administration to launch further environmentally friendly policies.

(China Daily 07/14/2007 page10)

(For more biz stories, please visit Industry Updates)