Istanbul - An overhaul of China's state-dominated financial system is expected to be at the core of changes the ruling Communist Party says are the most ambitious since the launch of market-style reforms in 1979.The Chinese government will launch a trial program for private firms to set up banks, with Internet giants Tencent and Alibaba reportedly among the first applicants.Chinese regulators approved the trial program as the government seeks to ease restrictions on the state-controlled banking industry. Most Chinese lenders are statecontrolled and banks founded by private companies are extremely rare, while access to lending is a key element of the Communist authorities' control of the economy.At a key meeting in November the ruling party listed opening the banking industry to private investors as one of its major reform policies for the financial sector, a move aimed at introducing competition and helping small enterprises obtain loans.Companies including Internet giants Alibaba and Tencent have been picked to set up China's first five privately owned banks, said Shang Fulin, chairman of the China Banking Regulatory Commission.Shang Fulin stressed that private banks will be expected to operate independently and according to market principles. He also said preparatory work was still underway and gave no timetable for when the banks might open. Each new bank will be expected to have at least two private investors.Reform advocates complain state banks are holding back the world's No. 2 economy by failing to lend to entrepreneurs who create new jobs and wealth. Critics accuse pro-reform figures of hurting state-owned banks and a commentator for state television called them "financial parasites."Alibaba Group is one of the world's biggest online commerce companies. Tencent Holdings Ltd. is China's most popular online games service. Both have launched popular online financial services that have drawn deposits away from banks in China by paying higher interest.In addition to Alibaba and Tencent, the ruling party newspaper People's Daily said the 10 companies picked in the first group to invest in private banks include auto parts maker Wanxiang, the French tourism conglomerate Fosun and real estate developer Huabei.The new institutions will be expected to focus on lending to small- and medium-size companies, Shang said, using the Communist Party's term for private business. They will be required to have adequate risk controls, reserves to insure against losses and a "living will," or plans to wind up a failed bank, to prevent the burden from falling on taxpayers, Shang said.Private investment accounted for about 11 percent to 12 percent of the Chinese banking industry's total capital, with the rest controlled by the state, Xinhua News Agency reported on March 5, citing Yang Kaisheng, the former president of Industrial & Commercial Bank of China Ltd.