The authorities are considering allowing Chinese banks to charge for their services in an effort to improve their overall competitiveness.

The central People's Bank of China (PBOC) has handed over a draft of rules governing banking service fees to the State Development Planning Commission for approval, insiders said.

Yet the central bank and the commission are split over what services should be priced by the government, and what prices should be negotiated with the China Bank Association, which wrote the protocol of the PBOC draft.

Insiders say the proposal covers over 40 intermediate services that Chinese banks are providing to their clients and is expected to lay the groundwork of a philosophy among Chinese people that banking services should come at a price.

Chinese banks are still offering most of their intermediate services for free, a practice local bankers desperately want to abort in face of growing foreign competition since China became a member of the World Trade Organization (WTO).

The Citibank and the Hongkong Shanghai Banking Corporation, the first two overseas banks to gain permission to extend foreign currency services to Chinese individuals, took aback local depositors by announcing charges for savings accounts below respective levels earlier this year.

While it was not clear if the government would allow local banks to follow suit, bankers are looking forward to an early policy loosening.

A PBOC official Tuesday dismissed as untrue newspaper reports that the government is considering charging for savings services. "For that we'll have to revise the Commercial Bank Law first," he said.

Analysts say the low depositor costs may help make local banks remain attractive to the Chinese in the face of more mature services at foreign banks, but local bankers are more concerned on the costs of their services.

"Taking deposits also has its costs, why can't banks charge for their services?" asked an official with the Industrial and Commercial Bank of China (ICBC).

According to ICBC officials, 10 to 20 per cent of its total savings accounts have less than 100 yuan (US$12) in them, to which the bank has to devote as much energy and resources.