Dongfeng Peugeot, a unit of the joint venture between French PSA Peugeot Citroen and China's Dongfeng Motor Corp, on Saturday clinched a car financing deal with three Chinese commercial banks.

According to the deal, Bank of China, Citic Industrial Bank and China Merchants Bank will provide favorable car loans to Dongfeng Peugoet's dealers.

The three banks will open overdraft accounts and on-line letters of credit for car dealers.

It is the right time for Chinese commercial banks to offer favorable loans to car dealers, Dongfeng Peugeot said in a statement to China Daily.

The deal flies in the face of huge bad car loans at Chinese commercial banks mainly because of the lack of a sound credit system in the nation.

By the end of the year, Chinese commercial banks will have more than 90 billion yuan (US$1.1 billion) of bad car loans, half of their total outstanding car loans.

Chinese banks have placed controls on car loans since the beginning of this year.

The deal comes one month after Dongfeng Citroen, another unit of the Sino-French joint venture, signed an agreement with Bank of China, Citic Industrial Bank and China Everbright Bank to provide car loans to its dealers.

"The move will further boost the upward trend of our sales," Dongfeng Peugeot said.

Dongfeng Peugeot has received orders for more than 25,000 units of the Peugeot 307 notchback, which was launched in April this year at the joint venture's plant in Wuhan, capital of central China's Hubei Province.

(China Daily November 1, 2004)