China will set up five private banks on a trial basis before the practice is extended to more areas, the chief of the country's banking regulator said on March 11.

The first batch of five banks will be in Tianjin, Shanghai, as well as Zhejiang and Guangdong provinces, according to Shang Fulin, Chairman of the China Banking Regulatory Commission (CBRC).

Ten private companies, including Internet firms Alibaba and Tencent, have been selected to take part in the preparation work for setting up the banks, Shang noted, adding that their eligibility as shareholders will be subject to further examination.

Each of the banks will be co-sponsored by at least two private capital providers, Shang said.

Shang did not provide a timetable for the launch of the banks, saying that they will be approved when "conditions are ripe."

Setting up private banks in China was written into an ambitious reform package rolled out after the Third Plenary Session of the 18th Communist Party of China Central Committee in November 2013, representing further opening up of the country's banking sector.

Compared with existing commercial banks, private banks will be subject to the same regulation and supervision, according to the CBRC chief.

But financial services of private banks will be oriented toward small and micro businesses as well as residential communities, Shang explained.

Risk monitoring will be strengthened and shareholders' behaviors will be regulated, Shang added.