Loans for mergers and acquisitions in Shanghai rose to 10 billion yuan (US$1.5 billion) at the end of June because banks were encouraged to lend to help facilitate companies to integrate in order to boost economic upgrading.

Thirty-three loans were extended for M&A deals in the city by the end of June, the Shanghai Bureau of the China Banking Regulatory Commission said yesterday.

"The loans were granted to support emerging industries like the new-energy sector," the local banking regulator said.

CECEP (Tianjin) Investment Group, which focuses on new energy like solar, is one of the companies to benefit from such loans.

China has permitted banks to offer loans for M&As in 2009 for the first time since 1996 as a channel to spur corporate activities.

Such loans were previously banned because the regulator was concerned that banks would be saddled with bad debts from a spree of ill-advised lending to enterprises with poor balance sheets.

HSBC became the first overseas bank in Shanghai to test the water with the new loans as it lent 280 million yuan in June, the local banking regulator said.