The Asian Development Bank (ADB) will support China's drive to develop modern, effective rural financial services that help address the growing income gap between cities and the countryside, the bank announced on Friday.

ADB will extend a technical assistance grant of 500,000 US dollars to improve the central bank's statistical system regarding rural finance, and to help the government formulate policies that will lead to the development of an inclusive, market-oriented rural finance system.

"One of the components of the technical assistance is to support the establishment of a statistical system at China's central bank People's Bank of China (PBC) for the proper monitoring of rural financial flows for policy-support purposes," said Ying Qian, Principal Financial Sector Economist for ADB's East Asia Department.

He said that the current system only covers bank loans and in future it may be desirable to include data on deposits, remittances, and other forms of agricultural finance, including those from the informal market.

The project will research different rural financial services that could help government agencies develop policies combining a " top down" approach with "bottom up" innovations from communities. It will also look at how the gender-bias of current services could be improved to make them more sensitive to the needs of women, ADB said.

In 2007 the country's urban-rural income ratio increased to 3. 33 to 1, its biggest gap since 1978, and the government is now focused on policy actions aimed at reducing that divide.

ADB said the Chinese Government is providing 200,000 US dollars equivalent for the project, which is slated to run from October 2009 to October 2010. PBC will be the executing agency.