Chinese banks are not fully braced to compete with foreign-funded banks, said Shi Jiliang, vice president of the China Banking Regulatory Commission, the country's banking watchdog, in Beijing Tuesday at a high-level forum on China's financial reform.

"As the interim period after China's entry into the World Trade Organization (WTO) comes to an end, China's banking sector will soon enter a fully opening-up era, with foreign-funded banks enjoying national treatment," he said.

"The competitiveness of Chinese-funded banks has yet to be improved," he said.

"Renminbi service will be the focus of competition between Chinese and foreign banks," he acknowledged. "The rapid growth of foreign-funded banks' Renminbi business is beyond expectation," he said.

Foreign-funded banks will be less dependent on Chinese banks' Renminbi fund as they increase their own Renminbi deposit, Shi said.

Although Chinese banks have sped up internal reforms, they still "do not meet the criteria for the governance of modern financial companies," he said. Chinese banks, weak in management and risk control, are facing tough tests in Renminbi services, a traditional advantageous area for Chinese banks, he said.

Shi suggested that Chinese banks carefully study WTO rules and learn from other WTO members to safeguard the security of China's banking industry.