China will encourage people and companies to borrow more for consumption by setting up a nationwide credit system as part of its efforts to bolster domestic demand.

The government will boost credit sales in selected cities on a trial basis and require banks, insurance firms, industry associations and credit rating agencies to improve cooperation, the Ministry of Commerce said Thursday.

The country will draft policies on credit insurance and credit guarantee as well as help companies better manage credit risks, the commerce ministry said in a Website statement.

China is on track to shore up domestic consumption to sustain its economic growth as exports dwindle amid the global financial crisis. The central government has pledged to increase social welfare spending to spur demand.

The government hopes credit sales, which allow consumers to use borrowed money to buy goods, will boost the country's purchasing power, the statement said. Companies will be able to improve capital-use efficiency via buying on credit, it said.

China lacks a sound rating system and database for credit consumption, which hinders the development of the country's credit industry, the statement said. About 3 percent of sales in China are made on credit, compared with about two-thirds in the US, it said.

(Shanghai Daily December 19, 2008)