The announcement comes after the bank reorganized itself into a joint stock company yesterday, following the establishment of the Bank of China Limited.

BOC President Li Lihui said improvement of its financial strength was to be given priority over an initial public offering as the bank continues to carry out further reforms. "The earliest (for an IPO) would be the second half of next year," Li said.

He declined to give further details.

The bank, which was awarded a US$22.5 billion government bail-out last December, has been chosen for a pilot project to turn it into a joint stock bank.

The Bank of China Limited, which has a registered capital of 186.39 billion yuan (US$22.5 billion), took control of all of the Bank of China's assets, debts, employees and business.

Central Huijin Investment Co Ltd will hold 100 per cent of company's shares on behalf of the Chinese Government.

Li said the reshuffle marked a major breakthrough in the bank's development history.

The establishment of new board of directors and board of supervisors would help improve the bank's corporate governance, he said.

The bank was also in talks with a number of company investors to hold stakes in its initial public offering, Li said.

But the bank has yet to chose appropriate candidates, he said.

Wang Zhaowen, a BOC spokesman, said earlier an introduction of foreign companies as strategic investors would be beneficial for increasing capital strength, optimizing capital structure and diversifying the ownership of the bank.

More importantly, foreign company investors could bring in advanced management experiences and improve the bank's corporate governance, he said.

According to BOC Spokeswoman Zhou Ning, Bank of China's financial health had further improved in July.

Its bad asset ratio fell to 5.43 per cent at the end of July, down from 5.46 per cent at the end of June. The ratio stood at 16.3 per cent at the start of the year.

The bank's capital adequacy ratio, a measure of how much capital it has relative to assets, rose to 8.3 per cent at the end of July from 7.9 per cent at the end of June, she said.

Operating profits in the first seven months reached 37.9 billion yuan (US$4.6 billion), up 21 per cent from the same period a year ago.

Niu Li, a senior economist at the State Information Centre, said Chinese commercial banks would have to sharpen their competitive abilities before foreign banks can enter the Chinese market without restrictions at the end of 2006.

The banks would have to lower their rates of non-performing loans, get rid of historical financial burdens and raise their capital adequacy levels to international standards, he said.

The country's commercial banking laws stipulate that commercial banks' capital adequacy ratios would have to reach 8 per cent, the minimum required by the Basel Capital Accord reached by international banking managers.

"This means China's commercial banks, especially the four State-owned banks, will have to achieve that goal before they can be listed," Niu said.

China Construction Bank, another State-owned bank chosen by the central government as a pilot project, said earlier its non-performing asset ratio dropped 5.69 percentage points from the first quarter of this year to reach 3.08 per cent at the end of June.

The bank is expected to establish a joint stock bank in September, following the split-up of the institution into two.

It plans to take a lead among the four largest State-owned banks earmarked for listing.

Reliable sources said regulators are expected to finish studying the reform scheme by the Industrial and Commercial Bank of China within this year. The bank is planning to complete its share-holding reform by next year. Enditem