China's banks are now allowed to sell loans to each other, marking a significant stride toward a market-driven financial system.

At a ceremony on September 25 in Shanghai, 21 banks, including the Industrial and Commercial Bank of China Ltd. (ICBC), Agricultural Bank of China Ltd. and Bank of Communications Ltd. (BOCOM), joined the interbank transfer system.

The first deals were also announced, including one in which BOCOM sold 40 million yuan ($6 million) in loans to ICBC's Shanghai branch.

The transfer system will liberalize interest rates, help lenders optimize their credit structure and keep a handle over market risks, said Zhou Xiaochuan, Governor of the People's Bank of China, the central bank.

It will also help the central bank supervise the banking system and control the macro-economy, he said.

As part of the country's stimulus program, Chinese banks lent 9.6 trillion yuan ($1.4 trillion) in 2009. Despite a much slower lending pace this year, some lenders are still struggling to meet the regulatory requirement of a loan-to-deposit ratio of 75 percent.

With the chances to transfer loans off their balance sheets, it should be easier for banks to comply with the rules, said Zhou Shanshan, a senior analyst at BOCOM International Holdings Co. Ltd.