The central government is likely to set up a new framework to manage its stakes in financial institutions such as banks, insurers and brokerages by early next year.

The efficient and market-oriented management of 40 trillion yuan (5 trillion U.S. dollars) in state-owned financial assets will be on the agenda of this month's National Finance Conference which will chart the country's financial course for the next few years.

"If it is decided that the new framework will be established, it will be in place no later than March 2008," an official close to the conference said.

The conference is likely to discuss whether China should set up an independent government investment company or an administrative body like the State-owned Assets Supervision and Administration Commission of the State Council, an administrative body set up in 2003 to manage non-financial assets.

An official close to the Ministry of Finance propopsed that the ministry's Finance Department which currently functions as a management body of financial assets be at the core of any structure.

However, some analysts favour the setting up of a government investment company by restructuring Central Huijin Investment Co Ltd, an investment arm set up in 2002 with a mission to reform State-owned banks burdened with a high ratio non-performing loans.

"China should set up an investment body directly under the control of the central government by restructuring Central Huijin," Yi Xianrong, a researcher with the Chinese Academy of Social Sciences said.

"A commercialized institution operating on sound market principles is much more efficient than an administrative body that is easily influenced by government whims," Piao Yongxiang, a researcher with the central bank said.

Central Huijin has invested 5 trillion yuan (641 billion dollars) in 20 state-owned financial institutions including major commercial banks and a dozen brokerages. However, the company was originally set up as a policy-directed body with the aim of injecting capital into State-owned banks during their share restructuring.

A few officials and analysts believe that the example of Singapore-based Temasek Holdings, which were created in 1974 as an investment company under the full control of the island state's government, could be emulated.

"We should reform Central Huijin following the model of Temasek Holdings to clarify the company's rights and responsibilities in order to make sure it has good corporate governance," Wu Xiaoling, vice-governor of the central bank, said at a forum held in Beijing earlier.

The National Finance Conference is held twice at every five years. At the last one held in 2002, the government decided to set up a reform team led by the central bank to resttructure the country's Big Four State-owned banks. Central Huijin was later set up with net assets of 45 billion dollars to inject capitals into the banks.