THE newly established National Development Bank of China has established a lending quota of 80 billion yuan (about HK$71.12 billion) to support key projects on the mainland, according to a senior Chinese banking official. Zheng Bailin, deputy chief executive of the Bank of China Hong Kong-Macau Regional Office, said at a seminar in Hong Kong yesterday the policy-oriented bank had started operation. Two other policy banks - Import and Export Credit Bank and Agricultural Development Bank - were also in the process of being established, he said. Mr Zheng, who is also general manager of Kwangtung Provincial Bank in Hong Kong, said the National Development Bank was scrutinising the funding requirements of projects to meet the demand. A total of 345 key state projects, which were previously handled by various government branches including the State Planning Commission, are now under the jurisdiction of the bank. Mr Zheng said about 40 per cent of the funds necessary for these projects would be provided in the first half of this year. The funds come from the government budget, bond issuance among domestic financial institutions, bond issuance overseas as well as international commercial loans. The setting up of policy banks is part of a comprehensive package to reform the banking system, which includes the setting up of a dedicated central bank and the transition of state-owned banks into commercial banks. Mr Zheng said in future, commercial banks could be solely owned, but could also be jointly owned by the state and other shareholders, with the state holding the majority stake. The next step of the reform is to speed up the development of the securities market. ''The future will focus on improvements to the state treasury bond market to create the right conditions for the central bank's open market operation,'' Mr Zheng said. He said in order for the banking reform to be successful, China must keep a tight grip on inflation. ''During the reform process, we should not give up traditional quantitative control mechanisms before new monetary policy and mechanisms are in place,'' he said. In addition, Mr Zheng said the banking reform should be complemented by reforms in other areas, including enterprise, foreign trade and taxation.