Analysts said regulatory loopholes could be bridged with the changes proposed. Financial regulation overlap especially at the local government level should also be reduced as well, though some investors are concerned it will usher in tighter control over financial and economic activities.

Here are the major changes set to take place:

NFRA

China will form a new financial regulatory body called the National Financial Regulatory Administration (NFRA).

The new regulator will be a beefed-up version of the China Banking and Insurance Regulatory Commission (CBIRC), and will be responsible for regulating all aspects of the financial industry except the securities sector.

It will take over some regulatory responsibilities, including overseeing financial holding companies and investor protection from the People's Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC), respectively.

It will report directly to the State Council, or cabinet.

CBIRC

The CBIRC, the former regulator of banking and insurance industry, will be dissolved.

PBOC

The PBOC's nine regional branches and related affiliates will be abolished, replaced by 31 provincial branches and five city-level branches.

The PBOC's county-level branches will be abolished, with functions transferred to the retained higher-level branches.

Analysts said the PBOC will in future be more focused on monetary policy, playing a similar role to the U.S. Federal Reserve.

The PBOC still reports to the State Council.

CSRC

CSRC, the original securities regulator, will be retained.

It will also take over supervision of a type of bond issued by state-owned companies from a separate regulator, the National Development and Reform Commission (NDRC).

Analysts said the change would help create a more unified bond market with more consistent regulatory standards.

The CSRC's administrative status will be upgraded "government agency" from a "public institution". It will be responsible directly to the State Council.

LOCAL FINANCIAL BRANCHES

A local financial supervision system will be set up, overseen by central government financial regulators.

Standardized rules should be applied across the regions regions and centralised management of financial affairs will be enhanced.

REGULATORY STAFF

Staff at financial regulators including the PBOC, NFRA, CSRC, as well as the State Administration of Foreign Exchange (SAFE), and their branches will be paid and treated as civil servants.

Previously, many were considered employees of public institutions, under looser administrative requirements.

(Reporting by Xie Yu; Editing by Robert Birsel)