The Shanghai Composite Index (FXI, quote) rallied overnight to its highest intraday level since December 13 of last year lead by China’s banking sector.

Image courtesy Seth Anderson: http://www.flickr.com/people/swanksalot/China’s fifth largest bank, China's Bank of Communications Co Ltd set the pace when it announced its intentions to seek out additional private investors.

The ability to sell stakes in the bank to private investors is now allowed under government reformed aimed in allowing private investors’ capital to play a larger role in China’s economy.

The government reform has help raise the sector on the hopes it will increase efficiency at state banks level, investors are also looking to China’s largest lender Industrial and Commercial Bank of China (IDCBY, quote) to issue stakes to private investors soon as well and should be meet with the same bullish sentiment.

Market participants pushed China’s four largest bank higher by 2% to 3.5% on the day with couple the smaller banks seeing a jump higher by 5% in some cases.

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