Support will be given to ensure the healthy development of the nonpublic economy, the communique said.

Mei Xingbao, an external supervisor for the Bank of China, said a multilayered capital market is likely to be cultivated with more private capital.

Competition will be introduced to improve the efficiency of State-owned banks, which have already accumulated large amounts of wealth through financing government-funded projects, he said.

He said it is expected to become easier for small and medium-sized enterprises to get loans from banking agencies after competition is introduced.

State-owned banks tend to resist reform because they have got used to earning money easily through government-funded projects, Mei added.

The second part of the financial reform is aimed at introducing more competition into financial services. The restructuring of the four largest State-owned banks since 2003 has helped them grow into some of the largest banks in the world in terms of assets. Some smaller joint-stock banks and credit services have also come into being. But for a country with myriad small enterprises, services are far from enough. Shadow banking is rampant where official banking either doesn't exist or is unable to provide the services required. Institutional barriers have remained high, preventing private investors from obtaining financial services, let alone operate their own banks.

A scientific fiscal and taxation system is an institutional guarantee to optimize resource allocation, protect the integrity of the market, safeguard social fairness and maintain China's long-term peace and stability, the communique said.

"Although there are few details, this part should contain simplification of tax items and a new tax base for local governments," according to Rui Meng, a professor of finance and accounting at the China Europe International Business School. "Local governments should no longer rely on increment (land transfers) and should shift toward inventory (property tax)."

Minister of Finance Lou Jiwei has previously promised to expand trials of a property tax, while reform of the consumption tax is also in sight. The resource tax on coal and metals, which had been levied by volume, will be calculated on a price basis, he said. "These three aspects should be part of the tax reform," Rui added.

This is a crucial part of the fiscal reform. Old, counter-productive taxes will make way for new, more productive taxes, such as the property tax, which has been piloted in some cities but has failed to have the desired effect to cool down property prices. The resource tax is only being collected at extremely low rates. An integrated regime and standard for consumption tax is lacking. The new environmental tax is often levied in the form of various administrative fees, which is not the best method. These taxes are believed capable of not only providing a sustainable revenue stream for local governments, but also of generating incentives for cutting waste and curbing pollution.