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The government must keep its status as the majority shareholder of State banks to ensure the country's economic and financial security, a senior official said in remarks published yesterday in domestic newspapers.

Meanwhile, a mid-sized bank, Dalian City Commercial Bank, became the latest domestic bank to announce it was seeking strategic institutional investors, domestic media reported.

In a speech to a national banking industry conference, Vice Premier Huang Ju stressed the need for domestic banks to improve risk management as they restructure and improve their competitiveness ahead of the opening of the financial market to full foreign competition late this year.

"For the sake of national economic security and financial safety, the government must retain its status as the controlling shareholder as the banks carry out shareholding reforms," the China Securities Journal cited Huang as saying.

The government has been encouraging strategic foreign investment in the banking sector, expecting such tie-ups to bring in international expertise and technology, as well as badly needed capital.

Dalian City Commercial Bank is in talks with several foreign investors, but leaning toward accepting bids from Canada¡¯s Bank of Nova Scotia, or Scotiabank, or National Australia Bank, the China Daily cited Liu Weizhi, manager of the bank¡¯s strategic development department, as saying.

The Dalian bank intends to bring in only one foreign bank, though it may also invite smaller investments by other institutions, the bank said.