China to forgive loans in quake area

BEIJING -- Chinese banks were told Friday to forgive debts owed by earthquake survivors in an effort to revive the shattered economy, and the government warned it was cracking down on price-gouging by merchants in the disaster area.

The government also said Friday it sent more fuel from China's strategic reserves to the disaster area.

The China Banking Regulatory Commission said banks should forgive debts owed by survivors of the May 12 quake who lack insurance. It gave no indication how much that might cost. But state-owned Agricultural Bank of China, the country's main rural lender, says it expects borrowers in the area to default on 6 billion yuan ($850 million) in loans.

"For borrowers who have suffered a great loss in the earthquake and had no insurance, or if they have insurance but still cannot repay their debts, their borrowing should be counted as bad loans and the banks should cancel them," the bank agency's announcement said.

But it gave no indication whether banks might receive government aid to make up for earthquake-related losses.

Before the quake, the government had frozen retail prices of gasoline and diesel, but allowed costs for producers to float. Oil refiners say they are suffering heavy losses and some began cutting production last year.

The quake in Sichuan province destroyed thousands of factories, homes and other buildings. The government put business losses at 67 billion yuan ($9.5 billion).

As little as 5 percent of losses are believed to be covered by insurance, according to financial analysts.

Banks also should forgive credit card debts owed by people killed in the quake, the bank agency said.

The government says it will create a 70 billion yuan ($10 billion) fund to pay for reconstruction.

Also Friday, the deputy governor of Sichuan said authorities are taking action against price-gouging in earthquake areas after finding 60 cases of overcharging.

"We will punish those violations," Li Chengyun said at a news conference. He gave no details of the case or what penalties merchants might face.

The government said Friday it is shipping another 49,000 barrels of fuel from strategic reserves to the disaster area.

The fuel released Wednesday and Thursday brings the amount distributed to disaster areas to 169,365 barrels, the Cabinet's National Development and Reform Commission said.