China will continue to tighten its monetary policy in the second half of this year, but more funding will go to rural areas, affordable housing and small businesses, the China Securities Journal reported Thursday.

Although consumer price growth is likely to ease in the second half, China's monetary policy is expected to be kept relatively tight at an overall level to retain inflation while the government relaxes credit control for targeted sectors, said the newspaper.

The Chinese banking regulator has required commercial banks to provide preferential credit support to qualified affordable housing projects with favorable interest rates, said the report, citing regulatory sources.

This compares to an increase of 10 to 50 percent in the current lending interest rate for general commercial loans.

China's new RMB loans reached 633.9 billion yuan in June, an increase of 20.7 billion yuan from a year ago, according to data released by the People's Bank of China (PBOC), the central bank.

China has raised bank interest rates three times this year to curb inflation, with the one-year benchmark lending rate now at 6.56 percent.

The Chinese government will also unveil a series of measures to support the development of small- and medium-sized enterprises (SME) in the second half, said the report, citing authoritative sources who declined to be named.

Liu Mingkang, chairman of the China Banking Regulatory Commission , said recently at the mid-year meeting of CBRC that Chinese lenders would strengthen financial services for SMEs and strive to keep SME lending growing at a quicker pace than the general rate.

The CBRC will also increase rural lending in the second half and meet the target of establishing financial institutions in 500 villages that presently do not have financial services, said Liu.

Tao Dong, an economist with Credit Suisse, said China is likely to slightly adjust its credit structure in the future and its monetary policy will be "directional loose."

China's inflation unexpectedly accelerated to a 37-month high in July, with the Consumer Price Index (CPI), a main gauge of inflation, surging 6.5 percent last month year-on-year, according to the National Bureau of Statistics.

Source:xinhuanet