China has announced plans to push ahead with reforms of its debt-ridden banks. The country's chief banking watchdog said on Monday that it would pick one or two of the biggest four state banks to test its plans for reconstruction.
The regulator also outlined moves to ease foreign banks' entry into the financial services market, allowing more investment in local banks.
The aim is to cut back on the bad debts estimated at 2 trillion yuan ($242bn; �140bn) which are hobbling lending.
At a news conference in Beijing, the China Banking Regulatory Commission (CBRC) chief Liu Mingkang told reporters that non-performing loans amounted to 22% of overall bank lending.
Some analysts fear the real figure could be twice as high, making reforms even more urgent. The debts have been built up in the form of lending to loss-making state-owned enterprises or at the behest of senior figures in the Communist party, and are unlikely ever to be repaid.
Caution
The step-by-step approach of the CBRC is likely to be welcomed by observers as an antidote to a mass bailout, which has been tried unsuccessfully in the past.
The clean-up is necessary to prepare for an opening of the banking market under China's World Trade Organisation commitments.
The relaxation of limitations on foreign banks also unveiled on Monday included a lowering of the requirements for the amount of capital that foreign bank branches must hold.
The limit is to drop to 500m yuan from 600m yuan, Mr Liu said.
And four cities are to be added to the list of places where foreigners can do business, taking the total to 13.
"All very positive stuff," said Sunil Garg, banking analyst at Fox-Pitt Kelton in Hong Kong.
"The government is quite serious about accelerating the bank reform process."
But he warned that despite the possibility of more foreign investment, the size of the bad loan problem was still worrying.
One-Minute World News 
News services
E-mail this to a friend 
Printable version 
All very positive stuff 
