China's local governments put as much as 23.3 billion yuan (about 2.8 billion US dollars) into city commercial banks in 2004 to offset their losses from bad loans and help them grow in a healthier manner, the China Banking RegulatoryCommission (CBRC) said Monday.

CBRC said local governments have accounted for nearly two-thirds of bailouts of city commercial banks over the past decade.

"For a long time, the high non-performing loan (NPL) rate has been beleaguering the development of city commercial banks," a CBRC spokesman said.

CBRC is tightening its supervision of city commercial banks and helping local governments mitigate the problems they have faced since the CBRC split from the People's Bank of China, or the central bank, he said.

Zhou Xiaochuan, the country's central banker, told the 2005 Beijing Fortune Forum earlier this year that the next stage of China's aggressive banking reform targets city commercial banks.

"Seventy percent of them will be reshuffled," he said.

China has 113 city commercial banks, most of which were mergers of smaller urban credit cooperatives.

City commercial banks had relatively better performance than the Big Four state banks, which had been ordered to extend loans to failing state-owned enterprises, resulting in a mountain of bad assets, analysts say.

The average NPL rate of city commercial banks stood at 11.5 percent at the end of March this year, whereas it was 15 percent at big state banks.

Chinese banks are accelerating NPL reduction and advancing other reforms to prepare for competition from foreign rivals when the country opens still more widely its financial market under a commitment to the World Trade Organization.

A number of city commercial banks are selling shares to foreign investors and trying to stage IPOs (initial public offering) to promote corporate governance structures and streamlined operations,sources say.

On Monday, a banking regulator said the city governments of Harbin, Shenyang, Dalian, Chengdu, Chongqing, Qingdao and Anshan have done a "good job" in assisting their city commercial banks in NPL reduction last year.

By the end of 2004 local governments injected a total of 35.83 billion yuan (some 4.3 billion dollars) into city commercial banks.

Source: Xinhua