China's central bank announced Thursday that it has approved the city of Lishui in the country's eastern Zhejiang Province as a pilot zone for rural financial reform.

The People's Bank of China will aim to build a multi-layer and low-cost rural financial service system with a wide coverage, according to a statement posted on its website.

It is hoped that the move will speed up the development of rural and township banks, micro-credit companies and other types of emerging rural financial institutions.

Private capital will be encouraged to enter the financial sector to set up community banks, financial leasing companies and other medium and small-sized financial institutions.

China's rural financial services are expanding rapidly but still lag behind both market demand and services in urban areas.