State-owned commercial banks should do more to improve their overall competitiveness - a crucial part of China's financial reform - a senior official of the nation's central bank said in Shanghai Sunday.

Speaking at the First Annual China Bankers Forum 2007 held over the weekend in Shanghai, Wu Xiaoling, the deputy governor of the People's Bank of China, said State-owned commercial banks face the pressure of increasing competition in financial intermediate services and product innovation.

"Banking reform in China is a long-term task, which must go deeper to ensure the success the financial reform as a whole," Wu said.

Improvement in governance structure and human resources are considered a major dual focus in reform. Further efforts should also be made strengthening the product pricing power of the State-owned commercial banks.

Wu also highlighted the remarkable achievements of the State-owned commercial banks in the past year in areas of increased profitability and asset quality improvement.

Bankers and financial industrial experts agreed China's rapid economic growth posed an urgent need to accelerate development in banking sector. They further highlighted the importance of a clear regulation framework and a sound macro economic environment.

Wu Jinglian, an economist of the Development Research Center of the State Council, said the establishment of a well ordered financial derivatives market is the most effective way to support the development of the banking sector.

"The government should keep the banks at arm's length, without intervening in core bank business," he said.

The building of a reliable and effective social credit system was also considered key to the healthy development of China's commercial banks.

Hu Zuliu, managing director of Goldman Sachs (Asia) L.L.C. said the government should serve the financial market rather than control it.

"The financial market should rely on itself to conduct necessary adjustments and the excessive intervention of the government should be avoided," Hu said.