At the same time, the China Export & Credit Insurance Corporation (CECIC), also a policy financial institution, will be transformed into a commercial insurer, according to a report on Monday's China Securities Journal.

China has for years mulled over the reform of its policy financial institutions, including three banks and the CECIC, an official start seems to be possible in 2007, according to the report.

"If the CDB is turned into a commercial bank, it will be one with the best asset quality in China," said the report.

The latest data available show that in the beginning of 2006, the CDB had a registered capital of 50 billion yuan (about 6.41 billion U.S. dollars), a total asset of 1.9 trillion yuan, a net profit of 22.8 billion yuan, and a non-performing loan ratio of aslow as 0.96 percent.

Ever since 2005, the Ministry of Finance has been working jointly with related departments on the reform of the CECI, a possible outcome would be turning it into a wholly state-controlled commercial insurer, running policy and commercialbusinesses in a seperate way.

Experts here held that China's policy financial system will have a dramatic change in the coming years. The other two policy banks, the Export and Import Bank of China and the Agricultural Development Bank of China, will also undergo reforms but under different policies due to their different financial conditions.

The experts believed that it is imperative to call for the transformation of policy banking system since the traditional function of policy banks is increasingly questionable with the development of a market economy in the country.

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