The China Postal Savings Bank (CPSB) was inaugurated on Tuesday morning, becoming the country's fifth largest bank.

Approved by China Banking Regulatory Commission (CBRC) to open for business last December, the new bank is expected to focus on retailing and intermediary businesses and offer basic financial services in both urban and rural areas.

The Shanghai Securities News reported the CPSB completed registration on March 6, with total registered capital of 20 billion yuan (2.6 billion U.S. dollars).

With its head office in Beijing, the new bank was preparing to open branches and sub-branches in the first half of this year, the sources said.

The inauguration marked a substantial step in China's financial reform, said Liu Andong, chairman of board of the CPSB, at the inauguration.

"(The establishment of the bank) will enhance the development of China's banking sector as well as the vast rural areas," he said.

But he declined to give further details.

Analysts say the establishment of the bank will improve financial services in rural areas by expanding financing channels.

By the end of 2006, postal savings in China amounted to 1.6 trillion yuan, the highest after that of the "big four" state-owned commercial banks -- the Industrial and the Commercial Bank of China, the Bank of China, the China Construction Bank and the Agricultural Bank of China.

Post offices boasted 36,000 outlets nationwide, almost 60 percent of them in rural areas, and 270 million account holders.

China's rural financial market was underdeveloped, according to the State Bureau of Statistics.

The government is seeking to promote rural development with the "new socialist countryside" program, which aims to improve agricultural production, living conditions and public administration in rural areas with their huge population of about 800 million.

It was estimated that the country would need 15 trillion yuan (1.92 trillion U.S. dollars) to fund its new countryside construction by 2020, most of which would come from financial institutions, but the rural financial network and services in place in many areas would not meet the demand.