China Postal Savings Bank opened its head office in Beijing on Tuesday, marking the start of business for the country's fifth-largest bank.

The China Banking Regulatory Commission approved the opening of the bank in December, a move that will allow it to expand its lending after being the deposit-taking arm of the state postal service since 1986, Xinhua News Agency said.

CPSB is expected to focus on retailing and intermediary businesses and offer basic financial services in both rural and urban areas, Xinhua said.

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

It is the government's latest attempt at turning China's banks into modern, profitable competitors, clearing away unpaid loans and turning to foreign strategic investors for capital and skills.

The bank, which has a network of 36,000 outlets attached to the postal network, will set up special sections providing financial services for rural residents, Xinhua said.

The four big state-owned banks are the Industrial and the Commercial Bank of China, the Bank of China, the China Construction Bank and the Agricultural Bank of China.