CHINA plans to make it easier for foreign banks such as HSBC Holdings Plc to set up rural operations as the government seeks to boost funding for farmers, said two people with knowledge of the matter.

Overseas banks will be allowed to manage operations in different counties through a single unit or a China-incorporated subsidiary, the people said, declining to be identified before an announcement. Banks must now oversee rural businesses through offshore entities with separate teams for each unit.

"This will spare them the trouble of having to either find a management team locally for every rural subsidiary or send experienced bankers from outside China," said Roy Zhang, a banking lawyer and partner at King & Wood, one of China's largest law firms. "It helps contain costs and makes management much easier."

China is trying to make loans more accessible for its more than 700 million farmers to combat a widening wealth gap and boost output of grain and pork after prices soared, Bloomberg News said. The May 12 earthquake in Sichuan Province, which cost the lives of more than 67,183 people, also damaged thousands of hectares of crops and killed at least 12 million farm animals, Vice Minister of Agriculture Wei Chaoan has said.

The China Banking Regulatory Commission will initially let two or three foreign financial firms operate under the new rules in a pilot program, the people said. Current rules won't be revised until after the program is evaluated, they said.

China eased rural banking rules in December 2006 to allow foreign firms along with local investors to form rural banks and loan firms.