For the past few decades, the People's Bank of China has exercised the functions and powers of a central bank, as well as handling industrial and commercial credits and savings business; it was neither the central bank in the true sense, nor a commercial entity conforming to the law of the market economy. But since reform and opening-up began in 1979, China has carried out a series of significant reforms in its banking system, and strengthened its opening to the outside world. Consequently, the finance industry has made steady development. At the end of 2004, the balance of domestic and foreign currency savings deposits stood at 25,318.8 billion yuan and the balance of home and foreign currency loans came to 18,856.6 billion yuan. Now China has basically formed a financial system under the regulation, control and supervision of the central bank, with its state banks as the mainstay, featuring the separation of policy-related finance and commercial finance, the cooperation of various financial institutions with mutually complementary functions. 

In 1984, the People's Bank of China stopped handling credit and savings business, and began formally to exercise central bank functions and powers by conducting macro-control and supervision over the nation's banking system. In 1994, the Industrial and Commercial Bank of China, the Bank of China, the Agricultural Bank of China and the China Construction Bank were transformed into state-owned commercial banks; and three policy-related banks were founded, namely, the Agricultural Development Bank of China, the National  Development Bank and the China Import and Export Bank. In 1995, the Commercial Bank Law was promulgated, creating the conditions for forming the commercial bank system and organizational structure, and providing a legal basis for changing the specialized state banks to state-owned commercial banks. Since 1996, the financial organizational system has gradually been perfected; the wholly state-owned commercial banks have been transformed into modern financial enterprises handling currencies; over 120 shareholding medium and small-sized commercial banks have been set up or reorganized; and securities and insurance financial institutions have been further standardized and developed. April 2003 saw the formal establishment of the China Banking Regulatory Commission (CBRC). Since then, a financial regulatory system has been formed in which CBRC, China Securities Regulatory Commission (CSRC) and China Insurance Regulatory Commission (CIRC) work in coordination, each body having its own clearly defined responsibilities.  

In January 2004, the State Council decided that the Bank of China and the China Construction Bank would start the experiment of transforming the shareholding system. The main tasks are to establish a standardized corporate governance and an internal system of rights and responsibilities in accordance with the requirements for modern commercial banks; to restructure the financial system, speed up the disposal of non-performing assets and to reinforce minimum capital requirement to build up first-class modern financial enterprises. Now, six shareholding commercial banks and urban commercial banks in China have begun to accept overseas investors as shareholders.