Shanghai Clearing House, set up by the People's Bank of China with the participation of 43 financial institutions, has started trial operations today. It aims to reduce existing and potential risks within the financial system.

All the electronic bills of banks engaged in the clearing house will be traded via the clearing house in the future, said an insider dealing with bills in a state-owned bank branch. The initiative is part of a key reform orientation under which regulators aim to digitize material paper that has been subject to frequent risks in the first half of this year and deal it in clearing houses.

"Information asymmetry will be eliminated after the release of the clearing house. Bill business will become banks' investment behavior only aiming at asset allocation, and the future models of bill business will see subversive changes," said researcher Zeng Gang majoring in banking industry in the Institute of Economics at the Chinese Academy of Social Science

Last year, the bill acceptance in China was worth around 20 trillion yuan (2.9 trillion U.S. dollars) with a transaction volume of 110 trillion yuan (15.9 trillion U.S. dollars). However, due to inadequate supervision, this year has seen frequent bill frauds with serious implications nationwide. One of the purposes of founding a clearing house is to reduce violations of laws and regulations and diminish risks undertaken by financial institutions.