Japan will offer 85.88 billion yenlow-interest loans to China during the coming fiscal year starting April 1, 2004, a drop of 11 percent year-on-year, according to a document signed by Chinese and Japanese officials on Tuesday.

According to the document signed by Chinese Vice-Minister, Wu Dawei, and Japanese Ambassador to China, Koreshige Anami, the loans will be used in seven projects in central and western China mainly concerning water treatment and environmental and training projects.

The two officials declined to comment on the loan at the signing ceremony in Diaoyutai State Guesthouse.

The loans carry annual interest rates of 0.75 to 1.5 percent with a maturity of 30 to 40 years with a grace period of a decade, according to the document.

The 11 percent reduction follows up to about 24 percent cuts in the past five years in Japanese yen loans to China since 2000, when it peaked at 214.4 billion yen (approximately 2 billion US dollars).

To date, Japan's low-interest yen loan commitment to China totaled 3.13 trillion yen (29 billion dollars) since 1980 for projects including the building of highways, airports, sewage systems and other infrastructure.

Japanese monthly magazine "Selection" in its November edition last year said China's aid and yen loans to China have helped improve infrastructure in China, thus promoting the Chinese economy and bilateral trade.

As almost all economists agree, the magazine said, the expanding Sino-Japanese trade has also contributed significantly to the recovery of Japanese economy in recent years.

Editor: Olivia