This is the first time China has officially announced the reform of policy banks, which also include the Export-Import Bank of China and the Agricultural Development Bank of China.

CDB's commercial operation will focus on middle and long-term business, said Chinese Premier Wen Jiabao at the meeting.

Public bidding will be introduced into the financial business previously commissioned by the government to policy banks.

The reform measures for the three policy banks will be made in line with the particular conditions of the three policy banks.

China will also promote reform of other commercial banks and financial asset management companies when the time is right, said Premier Wen Jiabao.

The decision was considered a further step in China's financial reform after the Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank and the Bank of Communications have listed on the securities market.

The meeting also mapped out the shareholding reform of the Agricultural Bank of China.

The launching of reform on policy banks conforms to the spirits of the first and the second national financial work conference held in 1997 and in 2002 respectively, that is to strengthen the competitiveness of China's banking sector, said Lin Yifu, a renowned economist from Peking University's China Center for Economic Research.

China established the three policy banks in 1994 to separate the business of policy loan from the four State-owned commercial banks as a move to step up their reform.

The three policy banks have played important roles in promoting important constructive projects as well as foreign trade and rural development.

By the end of last year, the non-performing loans rate of CDB was reduced to 0.72 percent.

Being commercialized, CDB will have the best asset quality of any Chinese commercial bank, said industrial insiders.

The non-performing loans rate of the Agricultural Development Bank of China was 7.65 percent at the end of 2006, and that of the Export-Import Bank of China, 3.27 percent.

The two banks will deepen their inner reform to make good preparations for their commercialized reform in the future.

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