"We need to accelerate the reform of the wholly state-owned commercial banks, focusing on a pilot project to transform the Bank of China and China Construction Bank into stock enterprises," said Premier Wen Jiabao Friday.

Other commercial and policy banks must also deepen their reform, he said in his government work report delivered at the opening of the Second Session of the Tenth National People's Congress.

China will press ahead with the trial reform of rural credit cooperatives and, on the basis of a review of that experience, gradually expand the reform to a wider area.

The premier said that China will continue to reform and open up the capital market and develop it steadily, adding the government will allow the amount of bonds issued by enterprises to increase and the proportion of direct financing by enterprises to rise gradually.

China will continue reforming the insurance industry and expand the insurance market. "We need to improve the regulatory systems for banking, securities and insurance, coordinate these systems better, and tighten financial control to ensure sound operation of the financial sector," he said.

China will also carry forward the reform of the fiscal and taxation systems, with focus on gradually shifting from a "production VAT" to a "consumption VAT" by reclassifying equipment investment as VAT-deductible to facilitate the technological upgrading of enterprises and enhance their capability for self-development.

These reform measures will be tried out first in some industries in northeast China this year, according to the premier.

Meanwhile, supporting measures must be formulated quickly so that the country can carry out the plan for reforming the export tax rebate system in earnest.

He pledged to carry forward the reform of the investment system, rationally define the government's investment functions, and establish a macro-control mechanism for investment and improve control methods and measures.

The government needs to make intensive efforts to put in place a system for collecting information on the credibility of enterprises and individuals, a system for overseeing the credit market, and a mechanism for penalizing those who lose their credibility, Wen said.

(Xinhua News Agency March 5, 2004)