China is closer to launching a deposit insurance system to protect savers against the risk of bankruptcy at a time when the banking sector is rolling out the welcome mat for more private sector investment. People's Bank of China, the central bank, said last week that "preparations are basically ready" to launch the system, which forms an integral part of planned interest rate liberalisation. Under the protection scheme, banks make contributions to the system and depositors are compensated if a bank collapses. Officials also want to enact China's first bankruptcy regulation for lenders with the China Banking Regulatory Commission (CBRC) stepping up efforts for its introduction, Yan Qingmin, vice-chairman of the banking regulator, said at a forum last week. Guo Tianyong, a professor with the Central University of Finance and Economics, said he expects the insurance scheme to be launched early this year. "It's the right time to launch the insurance system and bankruptcy rule so that banks can compete more efficiently as financial reforms are set to break the high-concentration of the banking sector," he said. The Communist Party pledged in a communique released after its third plenum last November to fast-track interest rate liberalisation and open the banking sector to private investors between now and 2020. China will award the first banking licences to private investors this year under a pilot scheme initiated by Premier Li Keqiang, the CBRC has said. The deposit insurance will probably cover up to 500,000 yuan (HK$636,000) for an individual depositor, Guo said. China's central government has been offering implicit guarantees to financial institutions in the wake of the closure of rural credit co-operatives over the past decade.