China to set up deposit insurance system

BEIJING, China— The Chinese government plans to set up a deposit insurance system that will cover all deposit-taking financial institutions, according to the official Xinhua News Agency.

"Now is the best timing to set up the deposit insurance system and we must not miss it," Wei Jianing, a researcher with the National Development and Reform Commission, told Xinhua.

The researcher did not say when the system would be launched.

"The system aims to set up a market-based risk compensation mechanism and apportion financial losses rationally when financial institutions are closed down...It is conducive for the stability of the financial system," he added.

China currently operates an implicit deposit insurance mechanism whereby the central bank or local governments bail out bankrupt financial institutions through large capital injections with government funds.