China plans to establish a new financial regulatory body, the National Financial Regulatory Administration, which will oversee all aspects of its financial sector, except for the securities market.
The watchdog aims to strengthen the centralised and unified leadership of the Communist party over the economy.
The State Council presented the proposal to parliament last week, which will centralise control of China's $60tn financial sector, abolish the China Banking and Insurance Regulatory Commission, and reduce regulatory overlap between local governments.
Staff numbers at central level state institutions will be cut by 5%.
However, analysts fear that the new regulatory body will consolidate power at the top and introduce more state and party intervention.
The creation of the regulation is seen as aligning with President Xi's objectives in restructuring the party-state.
China is set to replace its banking and insurance regulators with a new financial regulatory body under direct control of the State Council in an overhaul of state institutions.
The new regulatory body, the National Financial Regulatory Administration (NFRA), will bring oversight of China's financial system under direct control of the State Council, however, there are fears of state and party intervention.
This proposal will strengthen centralized and unified leadership of the Communist Party over the economy.
As part of the revamp, China will also set up a national data bureau and revamp its science and technology ministry.
The new financial watchdog is part of a series of reforms to "strengthen the centralized and unified leadership" of the party.