China will expand a trial program next year to allow the creation of purely private banks and ease the entry of private capital into the banking sector, China Banking Regulatory Commission (CBRC) Chairman Shang Fulin was quoted as saying in a State media report.

The official China Securities Journal reported on Wednesday that Shang had said at a meeting that the CBRC would add new channels next year by which private capital could invest in banking, including expanding the scope of pilot programs for private banks and consumer financing companies.

Shang's remarks follow a series of public commitments to increasing private capital participation in the financial sector to improve efficiency and reduce the central government's effective liability for bad debts at State banks.

The recent stock market rally has already channeled new funds from individual and institutional investors into banking shares, which have outperformed benchmarks after being neglected for years.

Reuters