"Banks that want to engage in these businesses must possess good strategies, robust risk control policies and strong management," Liu said at a conference yesterday organized by the People's Bank of China in Beijing. "The benefits of their expanded business must outweigh the sum of their parts so that one plus one makes three."

Bank of China, China Construction Bank and Bank of Communications have applied to the regulator for permission to set up insurance ventures.

The nation's insurance market may triple to 5 trillion yuan (US$639.4 million) in assets by 2010, with the premium doubling in the next five years, as economic growth encourages more citizens to buy protection and investment plans from commercial insurers.

In February 2005, the Chinese Government agreed to let banks set up fund management companies, ending a 12-year ban on their involvement in the stock market.

In April 2005, the Industrial and Commercial Bank of China, China Construction Bank and Bank of Communications became the first lenders approved to set up fund management units with overseas partners.

Chinese banks get more than 90 per cent of their earnings from interest income the difference between what they pay depositors and charge on loans. That compares with 65 per cent for overseas rivals, according to China Chengxin International Credit Ratings Co, a domestic credit rating company.

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