China's banking regulator has worked out new policies to encourage foreign banks to enter the country's vast western regions, saying they can directly set up branches instead of offices first in the regions.

Xu Feng, director of the Banking Supervision Department III with the China Banking Regulatory Commission (CBRC), made the remarks while speaking to a delegation of foreign bank representatives during an inspection tour in Chengdu, southwest China's Sichuan Province Tuesday.

"Foreign banks may directly apply for the establishment of operational branches in western China, without the need of opening representative offices there first," Xu said.

According to relevant existing regulations in China, a foreign bank is required to keep a representative office in a Chinese city for two years before it is permitted to open an operational branch there.

"If a foreign bank branch established in western China applies for running Renminbi business, the results of general appraisal may substitute that of performance appraisal in examination and approval," Xu said.

The two new CBRC polices, described as "green channels" by Xu, aim to boost the development of the vast but relatively underdeveloped western regions, a strategy initiated by the central government in 1999.

The western regions cover Shaanxi, Gansu, Qinghai, Sichuan, Yunnan and Guizhou provinces, Chongqing Municipality, Ningxia Hui, Xinjiang Uygur and Tibet autonomous regions. They cover a total of 5.38 million square km or 56 percent of China's total territory.

Xu's remarks aroused the interests of foreign bank representatives in the delegation.

The representative of the A.B.N. Amro Bank of the Netherlands said the Dutch bank has already filed an application with the CBRC for opening a branch in Chengdu and it hopes to become the first bank to directly set up an operational unit in the city without opening a representative office first.

The CBRC-sponsored inspection tour started Monday and ended Wednesday, involving 31 representatives from 26 foreign banks including Deutsche Bank, Tokyo-Mitsubishi Bank, Overseas Chinese Banking Corporation of Singapore, Bank of East Asia, HSBC and Citibank.