China Development Bank (CDB), one of China’s three policy banks, will take the lead in commencing commercial operations, according to the Third National Financial Work Conference. 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.

China announced a number of important key economic reforms on January 20 after closing a high-level conference on improving the management of its increasingly complex financial sector.

The two-day, closed-door meeting of top policy-makers chaired by Premier Wen Jiabao formulated plans crucial to the country’s financial system over the coming few years.

Wen announced plans to speed up the growth of the bond market by expanding the size of corporate bonds. He also said China would steadily push forward foreign exchange rates reform and expand the use of foreign exchange reserves.

It was also announced that shareholding reform will be launched at the Agricultural Bank of China, the last of the ‘big four’ state-owned banks to move towards market listing. At the last conference in 2002, policymakers set in motion the reform of China’s currency regime as well as the decision to overhaul China’s debt-strapped state banks in preparation for the opening of the sector to foreign competition last year.

China’s financial system today is a mixture of archaic state-planning and newly introduced market mechanisms, which has made the management of the world’s fourth largest economy an increasingly complex affair.

CDB’s commercial operation will focus on middle and long-term business, said Premier Wen. 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.

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.

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.