China's banking regulator on Friday urged banks to back the country's public housing projects by offering loans and discounts on lending rates to alleviate financing difficulties.

Banks should directly extend loans to government-invested public housing projects that have sufficient cash to repay credit and interest, the China Banking Regulatory Commission said in a statement posted on its website.

Banks can at most offer a 10 percent discount on interest rates on loans for public housing projects, according to the statement.

The regulator encouraged banks to make syndicated loans for such projects and provide loans to local government financing vehicles.

China aims to build 36 million low-income housing units in the five years to 2015, with a 10-million target for 2011, in an effort to stabilize runaway housing prices.