"China will further open up its financial sector in a step-by-step and controllable way," the China Securities newspaper quoted Liu Mingkang, deputy governor of the People's Bank of China, as saying.

"Meanwhile, we should establish an effective supervisory system," he said.

Beijing would grant more foreign financial institutions access to the Chinese market and allow selected institutions to set up wholly-owned subsidiaries or joint ventures, he said.

"The opening of the financial sector must come in line with China's financial supervisory ability," he said.

The central bank would strengthen supervision over foreign exchange and local currency businesses conducted by foreign financial institutions, he said.

Analysts said the Asian financial crisis could prompt Beijing to slow down the pace inopening of the capital market to foreign investors.

"The quantity and scope of the yuan business for foreign financial institutions will be further expanded," he said, without elaborating.

China earlier this year allowed selected foreign banks operating in the southern city of Shenzhen to apply for local currency business.

Authorities would study the possibility to unify taxes levied on foreign and domestic financial institutions, Liu said without giving further details.