Zhou held the press conference in conjunction with the annual session of the national legislature together with Liu Mingkang, president of the China Banking Regulatory Commission (CBRC).

The PBOC also plans in 2004 to strengthen coordination of its domestic and foreign currency policies, and better monitor and manage short-term capital flows.

Zhou ruled out the possibility of an interest rate hike this month, as the current rise in the consumer price index (CPI) has not yet reached a level that warrants it.

"As for the policy for next month or further in the future, we have to make further observations," said Zhou.

The central bank has adopted a series of measures to guard against possible inflation since last year. To strengthen macro controls, the central bank will make timely, proper adjustments to monetary policies according to changes in the situation, Zhou stated.

Although no timetable has been set for the Bank of China and China Construction Bank -- two of China's Big Four state-owned banks -- to be listed, Zhou said that efforts will be made to turn them into modern commercial banks in three years.

CBRC president Liu Mingkang said that the institutions will be turned into internationally competitive joint-stock commercial banks featuring capital adequacy, strict internal control, safe operation and good performance.

Earlier this year the Chinese government, for the first time in history, injected US$45 billion of its foreign exchange reserve in the two banks to help increase their capital adequacy ratios.

"But the key to success lies in the transformation of their operational mechanisms," Liu said.

This means the two banks should establish a good corporate governance structure, introduce overseas strategic investors, map out a clear-cut development strategy and cultivate a sound risk control and internal control mechanism, he added.

The CBRC president spoke highly of the four asset management companies, formed in 1998, in promoting banking reform. He said they had contributed to lowering the non-performing loans (NPLs) of the big four state-owned commercial banks by 10 percentage points in 1999 - 2000.

Overall, China’s major banking institutions slashed the ratio of NPLs by 5.3 percentage points to 17.8 percent last year. The major financial institutions cut their NPLs by 190.6 billion yuan (US$23.1 billion) to 2.44 trillion yuan (US$295 billion) at year-end.

According to Liu, loans to individuals and private companies from Chinese banks have been increasing by an annual average of 50 percent in recent years and the quality of these loans is generally good.

As China's private economy is still in its infancy, the country also needs to risk investment funds to finance private companies, high-tech ones in particular, Liu noted.

He also called for a further improvement of the legal environment for the development of private businesses.

Liu reported that the CBRC had punished 1,242 banking institutions at various levels and penalized 3,251 bank employees who violated financial regulations in the past year. It also strengthened its off-site surveillance function while monitoring economic and financial developments so as to promptly identify and signal potential risks.

In the past year, China also stepped up efforts to combat counterfeiting, confiscating 656 million yuan and US$5.1 million in bogus banknotes.

Currency management was also strengthened, with a total of 9,007 financial institutions found violating cash management regulations last year.

(Xinhua News Agency March 11, 2004)