Banks have approved 3 billion yuan (US$362 million) of such loans to students, said Zhang Guangming, deputy-director of the ministry's National Center for Student Loans.

In a bid to smooth the way for students from low-income families to go to university, China adopted a system of student loans in 1999 in eight cities, including Beijing and Shanghai. The loan system spread to the rest of the Chinese mainland in September 2000.

Fifty per cent of the interest on loans is paid for from the national budget in order to reduce the burden of student borrowers.

The appointed the four major State-owned commercial banks to run the business -the Agricultural Bank of China, the Bank of China, the China Construction Bank and the Industrial and Commercial Bank of China. According to Zhang, more than 1.12 million students had applied for a student loan by the end of June, accounting for 12.5 percent of college students in China's universities.

However, only 31.2 percent of students who applied for a loan actually received one, he said.

"That is a low percentage," he said. He added that a major reason was reluctance by the banks to grant the loans because of the potential risk.

To apply for a student loan, a student does not need to offer collateral to the bank. The decision as to whether or not a student will repay the money is based on the student's creditworthiness.

Zhang said an information consulting system on student borrowers will be open to the four commercial banks in September as part of efforts to check the students' creditworthiness.

He also called on universities to teach students about the importance of good creditworthiness. More than 1.4 million college students are in economic difficulty, accounting for nearly 20 per cent of all college students in Chinese mainland universities.

(China Daily August 28, 2002)