China has again urged banks to increase loans to help reconstruction in areas hit by natural disasters in order to bolster economic growth.

''Banks must take effective measures to grant loans to support economic development,'' the China Banking Regulatory Commission said in a statement issued on Sunday.

China suffered extensive economic damage in an earthquake in Sichuan on May 12 that killed 70,000 people; fierce winter storms that swept the south of the country in January and February also took a heavy toll on output and infrastructure.

Concerned that the disasters and a slowing global economy could push down growth too sharply, Beijing has started to relax its tight policy stance. The central bank has already increased lending quotas by 5%, instructing banks to steer the extra loans to small firms, the agricultural sector and rural regions.

The country's economic growth slowed to 10.1% in the second quarter of this year, down from 11.9% in all of  2007.

Reuters