An official with the People's Bank said that the company has for a long time been engaged in accounting and auditing business in China. The so called research report has largely distorted the fact of the capital quality of Chinese banks, and drawn ridiculous conclusions.

He said that China's national economy has maintained stable and rapid development, which is creating a healthy environment for thefinancial sector.

He said the Chinese government has adopted measures to prevent financial risks, including reforming the financial mechanism, strengthening financial supervision, introducing an open-up policy and establishing a modern enterprise system. Therefore, China's financial industry achieved remarkable progress in risk management and the banks' capital quality has been improved.

According to the official, by the end of March this year, the bad loan of China's commercial banks has kept reducing. The total volume of bad loans was 1312.47 billion yuan (US$164 billion), down 13.76 billion yuan compared with the beginning of this year. The rate of bad loan was eight percent, down 0.6 percent compared with the beginning of this year.