China has told banks to boost loans to poor students struggling to pay their way through university or face the consequences, the official Financial News said yesterday..

Banks must treat student loans as “an important task to guarantee the smooth entry into universities by poor students”, the paper quoted a circular by the central bank and China Banking Regulatory Commission as saying. “Commercial banks which fail to make timely student loans in line with state policies and regulations will be investigated and dealt with strictly according to law,” it said.

Some banks have backed off from the loans scheme, in which the government pays half the interest, because of rising repayment defaults caused by graduates failing to find jobs.

China launched subsidised loans for university students in 1999 as the cost of higher education began to soar after the government ended full subsidies. Tuition fees shot from several hundred yuan a year in the 1980s to as high as 8 000 yuan ($970) at some top universities, excluding living expenses.

Some poor students, particularly those in the countryside, have missed out on enrolment after years of painstaking study and after passing highly competitive entrance exams, state media have said. Average per capita income for Chinese farmers was 2 622 yuan in 2003, compared with per capita income of 8 472 yuan for urban residents.