The bonds would be limited to the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China and the Construction Bank of China, it said. Rules on trading of the bonds will be drafted by the finance ministry and the Central bank, People's Bank of China (PBOC), the report said.

The scheme, which will support China's four major banks, technically insolvent after years of lending to thousands of loss-making state-owned enterprises, was first unveiled in February. However, nearly a six-month silence on the bonds were seen by many here as backtracking on the much-needed financial reforms announced by Chinese premier Zhu Rongji.

According to someestimates, the four big banks account for more than 90 per cent of China's bank assets and two-thirds of financial assets.

Meanwhile, the PBOC has also asked all banks to sever their ties with specified outside subsidiary operations by the end of this year as part of the revamping of the country's financial sector. China, faced with severe strains on account of the Asian financial crisis is in the process of developing a modern financial system and a sound financial order after persisting with Soviet-styled centrally-planned economy for long period.

Under the new guidelines, all financial businesses have been given autonomy in making business decisions in compliance with law, be accountable to their own risks and be free from interference of any governmental agencies in their operations. The financial institutions, however, are required to strengthen internal control systems. Among the measures to revive China's financial sector, the PBOC has announced that credit ceiling control imposed on state-ownedcommercial banks will be removed, and asset liability ratio management and risk management will be introduced. Further, the Central Bank says it will improve the loan classification and review procedures in line with international practices and Chinese reality, revise the loan loss provisioning and write-off mechanism, and improve the capital replenishment mechanism to raise capital adequacy. PBOC said another two years of efforts will bring loan management of the Chinese commercial banks to high standard.