China is to establish a deposit insurance system, a key move in carrying out financial reform, according to a government work report delivered by Premier Li Keqiang to the annual parliamentary session on Wednesday.

"We will establish a deposit insurance system and improve the risk disposal mechanism of financial institutions," said Li, at the opening of the annual session of the National People's Congress, the country's top legislature.

The deposit insurance system is considered a precondition for freeing deposit rates, the last and most important step of interest rate liberalization.

China has taken incremental steps toward interest rate liberalization, including a central bank decision in July to scrap the floor limit for bank lending rates, and a guideline in December for piloting negotiable deposit certificates on the interbank market.

Wednesday's move came along with a slew of other measures for deepening financial reform, including granting financial institutions more power to set their interest rates, and promoting the establishment of small and medium-sized banks and other financial institutions by private capital.

The report said the country will keep the renminbi exchange rate basically stable at an appropriate, balanced level, expand its floating range, and move toward renminbi convertibility under capital accounts.

The government also pledged to advance the reform to introduce a system for stock issuance registration and promote the healthy development of Internet finance.