Beijing is pushing ahead with plans to bring its four wholly owned state banks into the world of modern banking in a bold initiative to be put forward at a landmark conference next week, sources say.
The initiative will involve converting the big four banks to shareholding companies.
This will help them recapitalise by allowing them to bring in outside investors to expand their capital bases to meet minimum capital-adequacy ratios set by the Bank for International Settlements, the Basle-based bank of central bankers.
More importantly, it will help the banks break away from the problem of being weighed down by disproportionally high levels of bad policy loans, estimated at 20 per cent of total loans, to decaying state enterprises.
The big four banks are: Agricultural Bank of China, Bank of China, Industrial and Commercial Bank of China and China Construction Bank.
Sources said that a new policy bank, could be created to absorb the banks' bad policy loans and take on staff made redundant by the four banks. This would also make the state banks more attractive to outside investors.
Analysts said this year's banking conference, first mentioned by economic affairs chief Zhu Rongji in Hong Kong last month, would be the most significant for the banking and financial world since Beijing launched its open-door policy in 1978.