1 Background and Significance of the PaperFinance is the core of modern economy. China’s financial system based on banking credit determines the importance of commercial banking in the national economy, especially the sate-owned commercial bank (the SOCB). The steps and results of the reform of the SOCB involve directly with strengthening China’s commercial banking, and influence the objective of the reform of China’s Socialism Market Economy realizing successfully. Along with the international integration of China’s economy and finance, it’s becoming inevitable for the SOCB to participate in international competition, looking for opportunities from all over the world to expand business and increase profits. Considering the status quo of the SOCB, viz., low management efficiency, low profits ability, heavy history burden, weak encouraging and restricting mechanism, and low competitive power, it’s impossible to win the international competition. At the Open early, along with the reform of the state-owned enterprise (the SOE), the SOCB started reforming, but fixing on internal reform, few results was obtained, hence accumulating a great deal of problems. If there is a fort left by the Plan Economy that is still not broken down now, it must be the SOCB, and there is certain historic rationality according to the logic of China’s gradual reform. As a special institution assuming macro regulation in transitional period, when the regulatory abilities of fiscal tools were limited, the SOCB exerted many administrative functions not assumed in Market Economy, providing a steady and safe financial environment with adaptive efficiency for the reform of China’s economy at the cost of lag of system reform. This ensured the reform of China’s economy proceeding successfully. Along with the reform of China’s Market Economy proceeding, if the reform of the SOCB is still limited inside the system, it’s impossible to obtain any reform effects. Because the marginal reform efficiency of the SOCB under the vested property rights structure is trending to zero rapidly, the efficiency of the SOCB is locked in the state of low efficiency. In order to raise the marginal efficiency of the reform, the forces outside the system must be absorbed in, or else the SOCB can’t meet the challenges derived from foreign commercial bank and domestic share commercial bank, which is fatal to China’s economy and finance.<WP=3>In November 2001, China entered the WTO, meaning the SOCB would face more and more drastic market competitions and challenges. The SOCB must step on the reform; the system balks holding back the reform must be eliminated as soon as possible; a common institutional flat for the SOCB competing with domestic and foreign commercial bank must be established. So the competitive power and profits ability of the SOCB must be raised to assure the SOCB surviving and developing in the cruel market competition. Under this background, researching the reform of the SOCB is of great and practical significance.2 Structure Frame and Main Contents of the PaperThis paper describes the background, history and the status quo of the reform of the SOCB, and analyzes the system involving the SOCB in awkward predicament. Drawing lessons and experiences from the reform of the SOE, the paper points out the aim of the reform, puts forward overall train of thought of the reform, and makes detailed research on how to resolve the problem about the three difficulties, and improve the outer environment that has much effects on the reform.1) Structure frame of the paper:The paper consists of introduction, 7chapters of 24 sections. Namely:IntroductionChapter one The Background of the Reform of the SOCBChapter two Exploration and Practice on the Reform of the SCOBChapter three The Aim and Overall Train of Thought of the Reform of the SOCBChapter four The Shareholding Reform of the SOCBChapter five The Reform of the Corporate Governance Structure of the SOCBChapter six The Solution to the Difficulties of the Reform of the SOCB