The central bank also urges banks to adopt a classified management system to monitor the quality of loans so that they can further reduce bad loans.

Commercial banks are required to establish an information disclosing system to make their business information more transparent.

State-owned commercial banks play a vital role in China's economic and social development and they also take a leading position in the country's banking industry in terms of total capital, business scope and contributions to national economic development.

Observers say whether state-owned commercial banks can maintain their market position through reform will have a very important bearing on the future of the country's entire financial industry and even the overall economic development of China.

At present, all state-owned commercial banks have formulated reform plans with an ultimate aim to become modern financial enterprises. In the next three to five years, they will carry out a series of major reforms ranging from corporate governance structure and corporate culture.

China's financial reform has been a major concern among participants in the on-going annual sessions of the legislative National People's Congress (NPC) and the National Committee of the Chinese People's Political Consultative Conference (CPPCC), the top advisory body of the country.

The NPC deputies and CPPCC members are especially interested in the reform of state-owned commercial banks this year and the statement of Premier Zhu Rongji on speeding up the building of a modern financial system and deepening the reform of financial enterprises.

It has been made clear that China's solely state-owned commercial banks are "enterprises that deal in money," and those with conditions can be turned into state-controlled joint-stock commercial banks which will be listed when conditions are ripe.

The concept raise first raised at a national financial meeting last month. It is widely believed that the meeting has set the tune for the market-oriented reform of state-owned commercial banks.

NPC deputy Xie Qingjian, head of the Nanjing Branch of the People's Bank of China, said that state-owned commercial banks still have a long way to go to reach the standards of modern financial enterprises in terms of business structure, operational mechanism and management.

Zhou Zhishi, a NPC deputy from the banking sector, said that in order to meet the challenges in the international financial market, state-owned commercial banks separate the functions of the government from business operations, and separate policy-oriented business from commercial activities to improve their competitiveness.

"It is very difficult to do so and calls for hard work in a fairly long period of time," Zhou said.

(Xinhua News Agency March 11, 2002)