"Meanwhile, a number of state-owned commercial banks - including the Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank - have reduced their non-performing loans and listed on the stock market."

The central bank has said it is imperative for China to set up the system as the banking sector has fully opened to the outside world.

Discussions on the establishment of a deposit insurance system has been put on the agenda of China's third national financial work conference, scheduled for later this month in Beijing, according to the 21st Century Business Herald.

China has long had a "latent" deposit insurance system, under which the central bank and local governments pay off personal debts when financial institutions fail due to management and operational faults.

But it has imposed a heavy burden on governments and undermined the central bank's monetary policy.

The world's first deposit insurance system was established in the United States in 1933. In 1980s and 90s, many countries followed suit after experiencing serious financial crises. By June 2006, 95 countries and regions had the system, with another 20 planning and preparing for the system.

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