Lai Xiaomin, a deputy director in the People's Bank of China's Bank Supervision Department, announced the central bank's decision while attending the Forum on National City Commercial Bank's Development held in Tianjin on September 23.

According to Lai, the volume of shares that outsiders can hold differs according to the source of the capital. Overseas funds and private domestic investors can hold no more than a 15 percent share in city commercial banks. The upper limit for personal investors, however, is only 5 percent.

Lai said, one third of city commercial banks nationwide have increased registered capital and expanded their share volumes since the second half of last year. The People's Bank of China believes these moves to be a good way of further optimizing joint-stock structures and reducing risk.

"The People's Bank of China encourages private enterprises, international financial institutions and foreign commercial banks, that accord with relevant requirements, to buy shares in city commercial banks," Lai added.

In addition, in 222 cities where no city commercial banks exist, the central bank will encourage local enterprises and personal investors to establish city commercial banks, in light of the need for local economic development and scheduled reform of state-owned commercial banks. For those, which have a registered capital base of over 100 million yuan (US$12 million) and abide by the Law of the People's Republic of China on Commercial Banks, the central bank will approve the formation of banks in principle.

Lai reaffirmed the advantages of introducing overseas capital. He said, by doing so, city commercial banks will be introduced to advanced techniques and improve their levels of management expertise. It will also go a long way towards achieving their integration with international practices.

(china.org.cn by Tang Fuchun, October 2, 2002)