China's central bank is to encourage the development of microcredit in a bid to boost employment, said a deputy governor of the People's Bank of China (PBC) on Wednesday.

Wu Xiaoling said at a meeting that the bank would establish a long-term re-employment system through facilitating microcredit.

Wu said: "The PBC always attaches great importance to boosting employment, and it will continue to make efforts to provide the people in need with more support."

In a meeting previously with Dr. Muhammad Yunus, who won the 2006 Nobel Peace Prize for first developing microcredit, Wu admitted that there were many challenges for microcredit in China.

"Serious financial risks in rural areas had led the regulator to stop issuing banking licenses in recent years, for example" she said.

Statistics shows that only 27.3 percent of China's rural households have benefited from microcredit provided by rural credit cooperatives.

"A lack of funding and the unclear legal status of microcredit institutions have caused a terrible bottleneck in microcredit operations," said Du Xiaoshan, an expert from the Chinese Academy of Social Sciences.

Microcredit is loans generally provided to low-income people. In China it is provided by commercial banks, city and rural credit unions.

By the end of September, China's financial institutions had distributed 7.45 billion yuan in microcredit, which helped many laid-off people find new work.

(Xinhua News Agency November 24, 2006)