China will further push forward the reform of the financial sector on the basis of the remarkable breakthrough it has achieved in revamping its state-owned commercial banks into joint-stock lenders, said Zhou Xiaochuan, governor of the People's Bank of China on Monday.

Several state-owned banks have completed the joint-stock reform and got listed on the A-share markets, which has laid a solid foundation for them to further improve capital adequacy ratio, asset quality and corporate governance, Zhou told a press conference held on the sidelines of the ongoing parliament session.

He said capital injection by the government into commercial banks has notched up good yields, and the state investment has earned handsome returns.

More measures will be put into place this year to create a sound credit environment and make lenders earn more profits, he said.

Three of the "big four" state-owned commercial banks, namely the Bank of China, the Industrial and Commercial Bank of China, and the China Construction Bank, have all been transformed into joint-stock lenders with the first two listed on both the mainland and Hong Kong bourses and the CCB on the Hong Kong stock market.

US Treasury Secretary Henry Paulson said on Thursday that China has made substantial progress in recapitalizing four of its top five state-owned banks and, even more importantly, inviting in strategic investors and completing IPOs.

The Agricultural Bank of China (ABC), the last of China's "big four" state-owned lenders to go public, is expected to finish financial restructuring this year in preparation for public listing.

In response to press questions, Zhou also explained the central bank's interest rate policy. He said the central bank will actively and prudently push forward the market-based interest rate reform, to make the interest rate responsive to market demand and supply.

The market-determined interest rate scheme will be improved as the government has gradually loosened control on interest rates setting in the monetary and bond markets, he said.

The Shanghai inter-bank offered rate (SHIBOR) went into operation on Jan. 4. Based on the daily rate for all loans offered by sixteen major banks, SHIBOR provides a benchmark for pricing short-term bonds and derivatives on the money market, serves as a key indicator of interest rates in the market, and injects real- time market information into monetary policy.

(Xinhua News Agency March 12, 2007)