Banks are encouraged to gain investment from well-managed private enterprises of good repute, said the China Banking Regulatory Commission (CBRC) in a guideline document.

 

Meanwhile, an originating bank of a rural financial institution is now required to hold no less than 15 percent of the stakes of such an institution, down from 20 percent, according to the CBRC.

 

Eligible micro-finance companies could be transformed into rural banks, it said.

 

Recently the central government has pledged to open the more heavily state-controlled and monopolized sectors to private investment.

 

Local banking authorities should create a good environment for private investment to participate in the banking industry, said the top regulator,adding that they should increase transparency of market entrance with no particular restriction or additional condition for private investors.

 

At the same time, the CBRC stressed that regulators should maintain prudential supervision over the sector to ensure the sound operation and steady development of financial institutions with private investments.

 

Banks are also required to increase credit support for private investment and provide innovative financial services to support the development of private enterprises, said the CBRC.

 

Private investment has already become an important part of China's banking capital base. Private enterprises have participated in the initial public offerings or equity optimization of some large commercial banks, and some of them have become major shareholders of several shareholding banks.

 

By the end of last year, private capital owned 42 percent of the share capital of China's shareholding banks, and for municipal commercial banks, the ratio was 54 percent, according to the CBRC.

 

In the same period, of China's 726 rural banks, 82 percent of their equities were owned by private capital.

 

China has established a pilot financial reform zone in the eastern city of Wenzhou late March this year, encouraging and supporting private capital to go into reforms of local financial institutions and speed up development of new financial organizations.